Under Which of the Following Conditions Will a Change in Government

question 108

Multiple Choice

Under which of the following conditions will a change in government purchases have the greatest effect on the economy in the short run?

• A) The aggregate demand curve is relatively flat.
• B) The aggregate demand curve is relatively steep.
• C) The short-run aggregate supply curve is relatively flat.
• D) The aggregate demand curve is vertical.
• E) The short-run aggregate supply curve is vertical.

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Definitions:

Physical Assets

Tangible objects or properties owned by an individual or business that have intrinsic value, such as machinery, buildings, or land.

Price Level

The comprehensive average of current prices for goods and services in the economic sector.

World War II

A global conflict that lasted from 1939 to 1945, involving most of the world's nations, including all of the great powers, eventually forming two opposing military alliances: the Allies and the Axis.

Nominal Interest Rate

The interest rate expressed in dollars of current value (that is, not adjusted for inflation) as a percentage of the amount loaned; the interest rate specified on the loan agreement.