Both Jones and Smith Agree That the Economy Is in a Recessionary

question 93

Multiple Choice

Both Jones and Smith agree that the economy is in a recessionary gap.Jones proposes a tax cut and believes that it will raise Real GDP and lower the price level.Smith agrees that a tax cut will raise Real GDP,but he argues that it will not lower the price level in the short run.It follows that

• A) both Jones and Smith believe that lower taxes will shift the AD curve rightward,but will not shift the SRAS curve.
• B) both Jones and Smith believe that lower taxes will shift the SRAS curve rightward,but will not shift the AD curve.
• C) Jones believes that the tax cut will shift the SRAS curve rightward and the AD curve will not shift.Smith believes that the AD curve will shift rightward and the SRAS curve will not shift.
• D) Smith believes that the tax cut will shift the SRAS curve rightward and the AD curve will not shift.Jones believes that the AD curve will shift rightward and the SRAS curve will not shift.

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Definitions:

Predicted Values

The expected outcomes calculated using a regression line or another statistical model.

Residuals

The differences between observed values and the estimated values of a regression model; essentially, these are the error terms indicating how far off predictions are from actual results.

Plot

A graphical representation of data points on a coordinate system, used to visualize relationships between variables.

Predicted Values

Predicted values refer to the results generated by a statistical model, representing what the model expects based on the input data.