Assume an Economy That Is Currently at the Full-Employment Level

question 29

Multiple Choice

Assume an economy that is currently at the full-employment level of output.If aggregate demand decreases, what should we expect in the median run?

• A)a decrease in potential GDP and the price level
• B)an increase in unemployment and the price level
• C)a decrease in unemployment and the price level
• D)an increase in unemployment and a decrease in the price level
• E)a decrease in potential GDP and an increase in unemployment

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Definitions:

Federal Reserve System

The central banking system of the United States, responsible for monetary policy, bank regulation, and ensuring financial stability.

Federal Budget

An annual financial statement presenting the government's proposed revenues and spending for a fiscal year, outlining the allocation of funds across various government departments and programs.

Monroe Doctrine

A U.S. foreign policy doctrine declared in 1823, stating that further efforts by European nations to colonize land or interfere with states in North or South America would be viewed as acts of aggression, requiring U.S. intervention.

Nineteenth Century

A period extending from the year 1801 to 1900, marked by significant industrial, cultural, and political changes globally.