If Government Purchases Increase and Net Taxes Decrease

question 134

Multiple Choice

If government purchases increase and net taxes decrease,

• A)the price level will fall
• B)the money supply must rise
• C)the aggregate demand curve shifts leftward
• D)aggregate supply shifts rightward
• E)output and employment will increase

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Definitions:

Monopolistically Competitive

Describing a market structure where many companies sell products that are similar but not identical, leading to competitive prices and product differentiation.

Demand Schedule

A chart that displays the quantity of a good or service demanded at various prices.

Price Elastic

The measure of how much the quantity demanded of a good responds to a change in the price of that good, reflecting its elasticity.

Cournot Duopolist

A type of duopoly model in which two firms choose their output levels simultaneously to maximize profit, assuming the competitor's output level is fixed.