When the Multiplier Is Included in the IS Curve

question 63

Multiple Choice

When the multiplier is included in the IS curve,

• A)a demand shock has a larger impact on short-run fluctuations than with the standard IS curve.
• B)it has no impact on potential output.
• C)a demand shock has a smaller impact on short-run fluctuations than with the standard IS curve.
• D)a change in taxes has no impact on short-run output.
• E)a and b are correct.

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Definitions:

Divergent Thinking

An approach or process designed for the creation of inventive ideas through the investigation of various available alternatives.

Framing Effect

A cognitive bias where people react differently to a particular choice or situation depending on how it is presented.

Availability Heuristic

A cognitive bias that leads people to overestimate the likelihood of events based on their ability to recall examples.

Intrinsic Motivation

The drive to engage in an activity for its own sake, enjoying the process without needing external rewards.