In the Case of "Unresponsive Expenditures," the Operation of the Pigou

question 112

Multiple Choice

In the case of "unresponsive expenditures," the operation of the Pigou effect

• A) shifts the LM curve downward, raising output.
• B) shifts the LM curve downward, but fails to affect output.
• C) shifts the IS curve rightward, but since that curve is vertical this has no effect on output.
• D) shifts the IS curve rightward, raising output.
• E) steep, weakening

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Definitions:

Long Position

The purchase of a security such as a stock or commodity with the expectation that the asset will increase in value.

Futures Contract

A formal contract for purchasing or selling an item at a pre-set price at a future date.

Maturity

The date on which the principal amount of a financial instrument is scheduled to be repaid.

Daily Settlements

The process by which futures contracts are revalued at the end of each trading day based on the closing market prices to reflect gains and losses.