a. Suppose the spread of democracy around the world increases consumer confidence in the United States. Instuctions: Drag the appropriate line in the correct direction to show the short-run effect on the AD/AS model. This will: (Click to select) increase output and raise the price level. reduce output and raise the price level. increase output and lower the price level. reduce output and lower the price level.
b. Suppose the government takes no action to help the economy. Eventually, the price level (Click to select) returns to its initial value decreases increases and output (Click to select) decreases returns to its initial value increases .
c. Suppose, instead, the government decides to take action to help the economy. You can recommend:
(Click to select) cutting taxes and/or cutting spending. doing nothing. raising taxes and/or cutting spending. cutting taxes and/or raising spending. raising taxes and/or raising spending. .
d. If the U.S. government makes the appropriate policy response, what happens to the price level and output in the long run. In the long run, the price level (Click to select) increases decreases returns to its initial value and output (Click to select) returns to its initial value increases decreases .