Use the Following to Answer Questions

question 90

Multiple Choice

Use the following to answer questions .
Exhibit: Aggregate Demand and Investment 2
-(Exhibit: Aggregate Demand and Investment 2) To eliminate the output gap, policy makers could conduct

• A) an open market sale to raise interest rates and reduce investment spending which will shift the aggregate demand curve to the left.
• B) an open market sale to lower interest rates and stimulate investment spending which will shift the short-run aggregate supply curve to the right.
• C) an open market purchase to raise interest rates and reduce investment spending which will shift the aggregate demand curve to the left.
• D) an open market purchase to lower interest rates and stimulate investment spending which will shift the short-run aggregate supply curve to the left.

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Definitions:

Cost Ratios

These ratios compare different types of costs to each other or to sales in order to evaluate a company's financial efficiency and profitability.

Constant Costs

Costs that do not change in total with the level of activity or production volume, within a certain range of activity or period of time.

Domestic Real Cost

The actual economic cost of production or acquisition, factoring in domestic purchasing power and excluding the effects of inflation.

Trading Possibilities Curves

A graphical representation illustrating the range of goods or services that two countries can trade with each other under the assumption of no trade barriers.