Suppose the Economy Is Initially in Equilibrium at Point a in the Figure

question 110

Multiple Choice

Suppose the economy is initially in equilibrium at point A in the figure below.A decrease in investment expenditures causes the AD curve to shift back to AD₂.Under these circumstances,which of the following statements is true?

• A)If the countercyclical fiscal policy is made at the correct time,the AD curve will shift to AD₄.
• B)If there is no countercyclical fiscal policy,the AD curve will shift to AD₄.
• C)If there is no countercyclical fiscal policy,the AD curve will shift back to AD₁.
• D)If the countercyclical fiscal policy is timely enough,the AD curve will shift to AD₃.
• E)If there is no countercyclical fiscal policy,the IA line will shift up.

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Definitions:

Observed Frequencies

The actual counts of occurrences for specific categories or outcomes in a data set.

Null Hypothesis

A default hypothesis that there is no significant difference or effect, intended to be contested by an alternative hypothesis.

Expected Frequency

The predicted number of times an outcome is expected to occur in a statistical experiment, based on theoretical probability distribution.

Significance Level

The threshold used in statistical testing to determine if a result is statistically significant, commonly set at 0.05, indicating a 5% risk of concluding an effect exists when it does not.