When the Multiplier Is Included in the IS Curve

question 80

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) a change in the real interest rate has a smaller impact on short-run fluctuations than with the standard IS curve
• 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 change in the marginal product of capital has a smaller effect on short-run fluctuations in output than with the standard IS curve

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Definitions:

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a specific price level, at a given point in time.

Equilibrium Price

is the price at which the quantity demanded of a good equals the quantity supplied, leading to market balance.

Eurotunnel

A major infrastructure project, also known as the Channel Tunnel, that connects the UK and France beneath the English Channel.

Commercial Traffic

The movement of goods and services or the flow of commercial transportation vehicles within a specified area or route.