Based on Our Understanding of the Model Presented in Chapter

question 58

Multiple Choice

Based on our understanding of the model presented in Chapter 3,we know that an increase in c1 (where C = c0 + c1YD) will cause

• A)the ZZ line to become steeper and a given change in autonomous consumption (c0)to have a smaller effect on output.
• B)the ZZ line to become steeper and a given change in autonomous consumption (c0)to have a larger effect on output.
• C)the ZZ line to become flatter and a given change in autonomous consumption (c0)to have a smaller effect on output.
• D)the ZZ line to become flatter and a given change in autonomous consumption (c0)to have a larger effect on output.

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Definitions:

Oil

A fossil fuel that is a primary source of energy for heating, transportation, and the production of many goods, playing a critical role in the global economy.

Trade Deficit

A situation in which a country's imports of goods and services exceed its exports, indicating that it is buying more from other countries than it is selling to them.

Exports

Items or services transferred from one country to another for commerce or trading.

Imports

Goods and services brought into a country from abroad for sale.