-Refer to the Above Diagram

question 6

Multiple Choice

-Refer to the above diagram.The sizes of the multipliers associated with changes in investment and government spending in this economy:

• A) are 2.5 and 1.5 respectively.
• B) are 3 and 2 respectively.
• C) are both 2.5.
• D) are 2 and 3 respectively.

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Definitions:

Optimal Allocation

The most efficient distribution of resources in a manner that maximizes the net benefit received from their use.

Scarce Resources

Natural or economic resources that are limited in supply compared to the demand for them.

Long-run Equilibrium

Long-run equilibrium occurs when all firms in a market or industry are producing at their most efficient level, with no incentive to enter or exit the market.

Purely Competitive

A market structure characterized by many buyers and sellers, where each has negligible impact on market price.