18 Questions
What happens to the AD curve when Non-price determinants of Aggregate Expenditure change?
Shifts left
When Government Spending (G) decreases, what happens to the AD curve?
Shifts left
What is the effect of an increase in Government Spending (G) on Aggregate Expenditure (AE)?
AE increases
What is the name of the range on the Aggregate Supply Short Run curve where prices and output change?
Mixed Range
What happens when the supply of bonds shifts to the right?
More people want to sell bonds
What is the result of an increase in Bond Tax (BT) on Consumption and Investment?
Consumption and Investment decrease
What is the effect of an increase in government spending on the aggregate demand curve?
It shifts the curve to the right
What happens to the interest rate when the price of bonds increases?
It decreases
What is the name of the phenomenon where industries reach full capacity before the economy reaches full employment?
Bottleneck Industries
What is the name of the person who buys a bond?
Bond holder
What is the effect of a decrease in aggregate demand on the economy?
It leads to recession
What is the formula for calculating the interest rate?
Interest payment / how much you paid for it
When prices of production decrease, what happens to the ASS curve and the variables of the economy?
ASS curve shifts right, output and employment increase
What is the primary objective of the government's fiscal policy in addressing a demand shift to the right?
Decrease government expenditure
What is the consequence of a decrease in wages in the economy?
Decrease in output, increase in unemployment, and lower prices
What is the term used to describe a situation where an economy is experiencing both recession and inflation?
Stagflation
What is the major challenge in addressing stagflation?
Lower unemployment, higher inflation
What is the primary function of money in an economy?
To facilitate exchange and payment for goods and services
Test your understanding of the effects of fiscal policy on aggregate demand, including the impact of government spending and taxation on consumption and investments. Learn how changes in government spending and taxation affect the AD curve and the overall economy.
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