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:

Implicit Memory

A type of long-term memory that is not deliberately recalled or consciously thought about, such as procedural tasks.

Anterograde Amnesia

is a condition characterized by the inability to form new memories following the onset of the amnesia, although memories from before the occurrence remain intact.

Retroactive Interference

A phenomenon in memory where newly learned information interferes with and disrupts the recall of previously learned information.

Misinformation Effect

A cognitive bias in which people's memories of an event can be influenced by misleading information presented after the event.