If Fiscal Policy Makers Increase Aggregate Demand in an Attempt

question 9

Multiple Choice

If fiscal policy makers increase aggregate demand in an attempt to decrease the unemployment rate below the natural rate of unemployment,then:

• A)the potential GDP will decrease.
• B)the potential GDP will increase.
• C)the only lasting impact of the policy is a higher price level.
• D)the only lasting impact of the policy is higher real GDP.
• E)the only lasting impact of the policy is lower real GDP.

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Definitions:

Mediator Variable

A variable that explains the mechanism through which an independent variable influences a dependent variable in a causal relationship.

Predictor Variable

A variable, often designated as the independent variable, that is used to make predictions about (or is assumed to cause) changes in another variable.

Criterion Variable

The variable that is predicted or explained in a study, often considered the outcome or dependent variable.

Latent Class Analysis

A statistical method used to identify subgroups within a population that share certain characteristics, without these groups being previously known.