After an Increase in Autonomous Spending, in the Long Run

question 411

Multiple Choice

After an increase in autonomous spending, in the long run changes in the price level

• A) will make the AE curve steeper.
• B) will make the AE curve flatter.
• C) will reduce the effect of the multiplier.
• D) will not affect the multiplier.

---

Definitions:

Real Risk-Free Rate

The rate of return on a risk-free investment, such as government treasury bills, adjusted for inflation, representing the true earning power of the investment.

Expected Inflation Rate

The predicted average rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.

Market Risk Premium

The additional return that investors demand for holding a risky market portfolio instead of risk-free assets.

Required Rate Of Return

The required rate of return is the minimum annual percentage earned by an investment that will induce individuals or companies to put money into a particular security or project.