Use the Following Graph to Answer the Following Questions

question 132

Multiple Choice

Use the following graph to answer the following questions.This graph depicts an economy where aggregate demand has decreased,with no change in either short-run aggregate supply (SRAS) or long-run aggregate supply (LRAS) .

-In the graph,aggregate demand decreases,causing a decrease in the aggregate price level and real gross domestic product (GDP) ,just like during the Great Depression.If short-run aggregate supply had decreased by the same margin as aggregate demand,how would the economy have behaved differently?

• A) The price level would have increased and real GDP would not have changed.
• B) The price level would not have decreased and real GDP would have decreased by more.
• C) Both the price level and real GDP would have decreased by much more.
• D) The price level would have increased and real GDP would have decreased.
• E) Both the price level and real GDP would have increased.

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Definitions:

Federal Deposit Insurance Corporation (FDIC)

A United States government corporation providing deposit insurance to depositors in U.S. commercial banks and savings institutions.

Member Banks

Banks that are part of the Federal Reserve System and are regulated by the Federal Reserve Board.

Mortgage-Backed Securities

Financial instruments secured by a pool of mortgages, which generate income from the mortgage payments.

Creditworthy Borrowers

Individuals or entities deemed capable of repaying a loan based on their financial history and current financial status.