In the Basic AD/AS Macro Model,the "Paradox of Thrift" Is

question 118

Multiple Choice

In the basic AD/AS macro model,the "paradox of thrift" is only a short-run phenomenon because

• A)consumers exhibit cyclical consumption behaviour.
• B)in the long run output is determined by potential output.
• C)savings are transformed into expenditures in the long run.
• D)the marginal propensity to consume is fixed in the long run.
• E)consumers base their consumption expenditures only on their lifetime income.

---

Definitions:

Price Controls

Government-imposed limits on the prices that can be charged for goods and services, intended to curb inflation or protect consumers.

Equilibrium Price

The price at which the quantity of goods supplied is equal to the quantity of goods demanded; also known as the market-clearing price.

Equilibrium Quantity

The measure of goods or services that are supplied and demanded at the price of equilibrium within a market setting.

Equilibrium Price

The transaction price at which the quantity of goods on the market meets the quantity buyers want to purchase.