A Flat LM Curve Implies That

question 28

Multiple Choice

A flat LM curve implies that

• A)an increase in government spending will change output by a relatively small amount.
• B)a decrease in taxes will change output by a relatively small amount.
• C)changes in government spending and taxes will have a large multiple effect on output.
• D)A and B.

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Definitions:

Coefficient Of Determination

A statistical measure, often denoted as R^2, that represents the proportion of the variance in the dependent variable predictable from the independent variable(s).

Positive Value

A numerical quantity greater than zero, indicating a magnitude or amount in the absence of direction or dimension.

Error Term

The part of an observation in regression analysis that the model does not explain, often considered as random noise.

Expected Value

The predicted average of a random variable, calculated by multiplying each possible outcome by its probability and summing the results.