Refer to the AD/AS graph. It shows an economy at a king run equilibrium with rea

Question

Refer to the AD/AS graph. It shows an economy at a king run equilibrium with real growth is 3% and is 4%. Assuming the prices are sticky in the short run. What will be the short run outcome of an unexpected increase in AD from AD 1 to AD 2? Select one inflation will increase to 7% and real growth will not change inflation will stay at 4% and real growth will increase to 5% Inflation will increase to 5% and real growth will increase to 5% Inflation will increase to 7% and real growth will increase to 5% Which of the following are concerns regarding expansionally fiscal policy. i.e., the increase in government spending and decreases in taxes select one it will create an asset bubble it will cause deflation it will increase budget deflects and the national debt it will decrease wages The natural rate of unemployment is defined as

Explanation / Answer

Answer 33:

Unexpected or unanticipated increase in AD will lead to increase in the inflation rate and also in the real growth rate. So, Option C.

Answer 34:

Option C. It increases budget deficit and thus national debt to cover the deficit.

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