If the government increases spending and there is a complete direct expenditure offset, then
a. the price level will drop.b. aggregate demand and real Gross Domestic Product (GDP) will not change.c. aggregate demand and real Gross Domestic Product (GDP) will increase by the amount of the spending increase.d. the government spending multiplier will be greater than zero.
When the government cuts taxes or increases government spending
a. the aggregate demand curve shifts to the left.b. the long-run aggregate supply curve shifts to the left.c. the aggregate demand curve shifts to the right.d. the short-run aggregate supply curve shifts to the left.
How might fiscal policy be used to correct an inflationary gap?
a. The exchange rate would be adjusted to encourage imports.
b. The exchange rate would be adjusted to discourage imports.c. The interest rate would be adjusted to encourage saving.d. Taxes would be increased to reduce aggregate demand.