Assume the Economy Is Initially in Equilibrium with Real GDP

question 61

Multiple Choice

Assume the economy is initially in equilibrium with real GDP equal to potential GDP.Other things equal,if the economy enters a recession and there are no automatic stabilizers,the IS curve would shift to the ________,and the shift would be equal to ________.

• A) right; decline in investment spending
• B) left; decline in investment spending
• C) right; decline in investment spending times the multiplier
• D) left; decline in investment spending times the multiplier

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Definitions:

Raw Materials

Basic materials that are used in the production process of goods, often transformed into finished products.

Fixed Overhead

Costs that do not vary with the level of production or sales, including rent, salaries, and insurance expenses.

Unfavorable Variance

A situation where actual results are worse than expected results, often indicating higher costs or lower revenues than planned.

Favorable Variance

A financial term indicating that actual costs were lower than the planned or standard costs in a budget.