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Using an aggregate demand and supply diagram, explain how each of the following scenarios affects the equilibrium price level and aggregate output. Consider first the short-run, then the long-run equilibrium for each scenario.
a) Consumers expect a recession, while resource prices rise at the same time.
b) Foreign income falls as domestic technology improves.
c) Foreign price level rises as domestic government cuts taxes.
d) Government spending falls and a higher future price level is expected.
e) Higher future income and lower price level are expected.
f) Resource prices fall and technology improves.
A government can finance its budget deficit by doing all of the following except: A. borrowing from its central bank. B. printing money. C. selling bonds. D. buying bonds.
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Question 1: Consider a closed economy with no government sector in which consumption (C) is related to income (Y) by the equation: C = A + bY (a) What is the marginal pr
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