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Questions and Answers
What is the impact of spare capacity on the elasticity of SRAS?
What is the impact of spare capacity on the elasticity of SRAS?
- It makes SRAS elastic (correct)
- It makes SRAS more inelastic
- It makes SRAS inelastic
- It has no impact on SRAS
What happens to the size of the multiplier in an economy with spare capacity?
What happens to the size of the multiplier in an economy with spare capacity?
- It remains the same
- It becomes zero
- It increases (correct)
- It decreases
What is the likely outcome if SRAS is inelastic?
What is the likely outcome if SRAS is inelastic?
- Higher multiplier effect
- Multiplier effect becomes zero
- No impact on multiplier effect
- Lower multiplier effect (correct)
What happens to interest rates when prices increase?
What happens to interest rates when prices increase?
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What is a 'reverse' multiplier?
What is a 'reverse' multiplier?
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What is the likely impact of higher interest rates on the economy?
What is the likely impact of higher interest rates on the economy?
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What happens to national income if SRAS is elastic?
What happens to national income if SRAS is elastic?
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What is the likely outcome if there is a decrease in AD?
What is the likely outcome if there is a decrease in AD?
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Why does an increase in AD lead to a larger increase in national income in an economy with spare capacity?
Why does an increase in AD lead to a larger increase in national income in an economy with spare capacity?
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What is the likely impact of a 'reverse' multiplier on the economy?
What is the likely impact of a 'reverse' multiplier on the economy?
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