Question 1 Figure 131 AS Assume the distance between AD and

Question 1 Figure 13.1 AS Assume the distance between AD, and AD2 is equal to the distance between AD and AD P2 AD AD Real GDP (dollars) Refer to Figure 13.1. f the economy is in equilibrium at point C, then, other things being equal, an increase in government spending wll Selected Answer decrease the price level. Answers decrease the price level. lower real GDP and leave the price level unchanged. lower real GDP and increase the price level. increase the price level and leave real GDP unchanged. have no effect on real GDP or the price level.

Solution

1.

D

Government spending at this level, will encourage ugly buying tendencies, and it will cause increase in the price level.

6.

D

It is overstated in nature.

8.

C

Countries also rely upon the direct tax such as income tax to accumulate the revenue.

10.

D

These three components sum up the government spending. Tax is the part of government revenue.