Consider the AD/AS Model

question 5

Multiple Choice

Consider the AD/AS model.Suppose there is a decrease in aggregate demand and,simultaneously,an increase in aggregate supply.The result will be a

• A)rise in real GDP but price level changes will be indeterminate.
• B)rise in real GDP and a rise in the price level.
• C)rise in real GDP and a fall in the price level.
• D)an indeterminate change in real GDP and a rise in the price level.
• E)an indeterminate change in real GDP and a fall in the price level.

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Definitions:

Capital Sources

Capital sources refer to the origins of the financial resources that businesses use to fund their operations and growth, including debt and equity.

Average-Risk Projects

Investments that present a level of uncertainty and potential returns that are typical or normal compared to other projects within the same industry.

WACC

An estimated average interest rate a company is expected to pay to all its security holders, reflecting the cost of equity and the cost of debt, weighted according to the proportion of equity and debt in the company's capital structure.

Below-Average Risk

Below-Average Risk indicates an investment or asset has a lower risk of loss compared to the average risk of the investment market or its relevant sector.