When the Economy Is Operating on Its Long-Run Aggregate Supply

question 26

Multiple Choice

When the economy is operating on its long-run aggregate supply curve and the government initiates an expansionary fiscal policy,the result is

• A)a permanent increase in real national income and a permanent increase in the price level.
• B)a temporary increase in real national income and a temporary increase in the price level.
• C)a temporary increase in real national income and an increase in the price level,followed by a reduction of real national income to its original level and a further increase in the price level.
• D)a temporary increase in real national income and an increase in the price level,followed by a further increase in the price level.

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Definitions:

P-Value

A measure of the strength of evidence against the null hypothesis provided by a statistical test, representing the probability of observing the test results under the assumption that the null hypothesis is true.

Explanatory Variables

Factors in a statistical model employed to account for changes in the outcome variable.

Multicollinearity

A statistical phenomenon in which two or more predictor variables in a multiple regression model are highly correlated, potentially distorting the results of the model.

Variables

Elements, characteristics, or features that can assume different values in a study or experiment, influencing the outcomes being measured.