-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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