If the Shifts in AD That Will Result from Policy

question 92

Multiple Choice

If the shifts in AD that will result from policy changes are fully and accurately anticipated, a decrease in government purchases or an increase in taxes would result in which of the following in the short run?

• A)​a higher level of real output and a higher price level
• B)​a higher level of real output but no change in the price level
• C)​a higher price level and a reduced level of real output
• D)​none of the above.

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Definitions:

Face Value

The nominal or dollar value printed on a security, such as a bond or stock, representing its official worth.

Quoted Price

The ongoing price tag attached to buying or selling a service or asset.

Selling Price

The amount of money a customer pays to purchase a product or service.

Market Interest Rate

The prevailing rate of interest available in the marketplace for securities of similar risk and maturity.