-Suppose That as a Result of Expectations of Lower Sales

question 109

Multiple Choice

-Suppose that as a result of expectations of lower sales in the future,a decrease in autonomous business investment causes aggregate demand to shift from AD₀ to AD₁ as shown in Figure 10.1.Which of the following statements is true?

• A)According to Keynesian theory,the economy will quickly adjust back to full employment.
• B)According to Keynesian theory,additional decreases in aggregate demand will occur.
• C)In the absence of any additional decreases in investment,the equilibrium will remain at Q₁ indefinitely.
• D)The GDP gap will be eliminated by the multiplier.

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Definitions:

Vicious Cycle

A sequence of reciprocal cause and effect in which two or more elements intensify and aggravate each other, leading to a worsening of the situation.

Depression

A psychological disorder distinguished by an unrelenting depressed emotional state or a disconnection from usual interests, critically impacting daily life functionality.

Major Depressive Disorder

A condition of mental health marked by ceaseless gloominess or indifference towards usual pursuits, significantly encumbering daily routines.

Psychological Problem

Refers to a mental or emotional issue that affects an individual's thinking, feeling, behavior, and overall functioning.