If Aggregate Demand Shifts Right and the President and Congress

question 23

Multiple Choice

If aggregate demand shifts right and the President and Congress want to use fiscal policy to reverse the change in output,they could

• A)increase government expenditures.If by the time policy has been implemented the economy has moved back to long-run equilibrium,then this policy will raise output above its long-run level.
• B)increase government expenditures.If by the time policy has been implemented the economy has moved back to long-run equilibrium,then this policy will reduce output to below its long-run level.
• C)decrease government expenditures.If by the time policy has been implemented the economy has moved back to long-run equilibrium,then this policy will raise output above its long-run level.
• D)decrease government expenditures.If by the time policy has been implemented the economy has moved back to long-run equilibrium,then this policy will reduce output to below its long-run level.

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Definitions:

Marginal Cost Curve

A graphical representation showing how the cost of producing one additional unit of a good changes as production volume changes.

Average Variable Cost

The total variable costs of production divided by the number of units produced, measuring the cost per unit that varies with output level.

Marginal Costs

The increase in total cost that arises from an extra unit of production.

Average Variable Costs

The total variable costs (costs that change with output level) divided by the quantity of output produced.