Assume the Equilibrium Level of Output Is Less Than Full

question 7

Multiple Choice

Assume the equilibrium level of output is less than full employment.To achieve full-employment equilibrium,the aggregate demand curve must shift to the right by

• A)The amount of the recessionary GDP gap.
• B)An amount less than the recessionary GDP gap because the spending increase causes the multiplier process to occur.
• C)An amount greater than the recessionary GDP gap because the spending increase raises the price level.
• D)An amount less than the recessionary GDP gap because the spending increase raises output and prices.

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Definitions:

Mistake

In legal terms, an erroneous belief, at contracting, that certain facts are true.

Fraudulent Misrepresentation

The act of intentionally making false statements to induce another party into a contract, resulting in harm or loss.

Express False Statement

An explicitly communicated untrue assertion, which can be a basis for a claim of deceit or fraud.

Mutual Mistake

An error shared by all parties to a contract, concerning a basic assumption on which the contract was based, that has a material effect on the agreed performance.