Use the Following to Answer Questions

question 91

Multiple Choice

Use the following to answer questions .
Exhibit: Aggregate Demand and Investment 2
-(Exhibit: Aggregate Demand and Investment 2) The economy is in short-run equilibrium. To move the economy to a long-run equilibrium, policy makers should

• A) increase interest rates and encourage investment to close the inflationary gap.
• B) reduce interest rates and discourage investment to close the recessionary gap.
• C) increase interest rates and discourage investment to close the inflationary gap.
• D) reduce interest rates and encourage investment to close the recessionary gap.

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Definitions:

Attraction-Similarity Hypothesis

The theory suggesting individuals are more likely to be attracted to and form relationships with others who are similar to themselves in various attributes.

Reciprocity

A social principle that involves exchanging things with others for mutual benefit, particularly in the context of social relationships.

Persuasive Communication

A method of communication aimed at influencing or changing the attitudes, beliefs, or behaviors of others through the use of argument, reasoning, or appeal.

Fear Appeal

A type of persuasive communication that influences behavior on the basis of arousing fear instead of rational analysis of the issues.