The government expenditure multiplier is the effect of a change in government expenditure (G) on goods and services: a. An increase in aggregate expenditure increases aggregate demand (AD), which increases real GDP, which induces an increase in consumption expenditure (C), and which further increases aggregate demand (AD). b. An increase in aggregate expenditure increases aggregate supply (AS), which increases real GDP, which induces an increase in consumption expenditure (C), and which further increases aggregate supply (AS). c.  An increase in aggregate expenditure decreases aggregate demand (AD), which decreases real GDP, which induces an decrease in consumption expenditure (C), and which further decreases aggregate demand (AD). d. An increase in aggregate expenditure decreases aggregate supply (AS), which decreases real GDP, which induces an decrease in consumption expenditure (C), and which further decreases aggregate supply (AS).   2.  How do banks create money? Group of answer choices a. Banks create excess/sur

ECON MACRO
5th Edition
ISBN:9781337000529
Author:William A. McEachern
Publisher:William A. McEachern
Chapter9: Aggregate Demand
Section: Chapter Questions
Problem 5.11P
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1. The government expenditure multiplier is the effect of a change in government expenditure (G) on goods and services:

a. An increase in aggregate expenditure increases aggregate demand (AD), which increases real GDP, which induces an increase in consumption expenditure (C), and which further increases aggregate demand (AD).
b. An increase in aggregate expenditure increases aggregate supply (AS), which increases real GDP, which induces an increase in consumption expenditure (C), and which further increases aggregate supply (AS).
c.  An increase in aggregate expenditure decreases aggregate demand (AD), which decreases real GDP, which induces an decrease in consumption expenditure (C), and which further decreases aggregate demand (AD).
d. An increase in aggregate expenditure decreases aggregate supply (AS), which decreases real GDP, which induces an decrease in consumption expenditure (C), and which further decreases aggregate supply (AS).
 
2.  How do banks create money?
Group of answer choices
a. Banks create excess/surplus reserves when they make loans and the new loans created are new money.
b. Banks increase reserve requirements for the new deposits created which are new money.
c. Banks print additional fiat currency notes which are new money.
d. Banks create deposits when they make loans and the new deposits created are new money.
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