If Fiscal Policy Makers Increase Aggregate Demand in an Attempt

question 87

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

---

Definitions:

Id

To Freud, the aspect of personality allied with the instincts; the source of psychic energy, the id operates according to the pleasure principle.

Ego

To Freud, the rational aspect of the personality, responsible for directing and controlling the instincts according to the reality principle. To Jung, the conscious aspect of personality.

Libido

in psychoanalytic theory, refers to the sexual or life drive that motivates individuals to seek pleasure and avoid pain.

Stimuli for Instincts

External or internal inputs that trigger natural, instinctive responses in an organism.