Question

Thinking about aggregate demand (AD) and aggregate supply (AS), we should expect fiscal policy that stresses...

Thinking about aggregate demand (AD) and aggregate supply (AS), we should expect fiscal policy that stresses active government policies to stabilize the economy would consider income taxes as leading to:
A. A leftward shift in the AD curve.
B. A rightward shift in the AD curve.
C. All of the other answers are incorrect
D. A rightward shift in the AS curve.
E. A leftward shift in the AS curve.

The APC can be described as:
A. relationship between a change in income and the change in consumption
B. change in income that will be consumed.
C. amount that income exceeds savings.
D. percentage of total income which will be saved.
E. All of the other answers are incorrect

Consider the country of Sealand. Its currency is called euro. Suppose there is an appreciation of euro. Which of the following is correct about aggregate demand (AS) and aggregate supply (AS)?
A. Appreciation of euro reduces AD in Sealand and may reduce AS by raising the prices paid for resources that are imported.
B. Appreciation of euro raises AD in Sealand and may increase AS by lowering the prices paid for resources that are imported.
C. All of the other answers are incorrect
D. Appreciation of euro raises AD in Sealand and may decrease AS by lowering the prices paid for resources that are imported..
E. Appreciation of euro reduces AD in Sealand and may increase AS by lowering the prices paid for resources that are imported.

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Homework Answers

Answer #1

Answer 1:

Option B. The fiscal policy considering government policies as needed to stabilize the economy would lead to rightward shift of the aggregate supply curve by changing the consumption expenditure in the economy and thus changing aggregate demand.

Answer 2:

Option E. The options are incorrect because APC in the economy = Consumption / Income

Answer 3:

Option E. Appreciation of the currency would lead to decline in net exports as exports become expensive and imports are cheaper which leads to lto decline in aggregate demand.It may increase AS by lowering the prices paid for resources that are imported.

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