Use the Following to Answer Questions

question 75

Multiple Choice

Use the following to answer questions .
Exhibit: Using the Aggregate Demand/Aggregate Supply Model 2
-(Exhibit: Using the Aggregate Demand/Aggregate Supply Model 2) Suppose the economy is initially in short-run equilibrium at K. Policy makers could either pursue a stabilization policy or allow the economy to adjust on its own. What is the difference between the two policy choices, if any?

• A) Both policies would return real GDP to its potential at a price level of P_j.
• B) Both policies would return real GDP to its potential at a price level of P_h.
• C) A stabilization policy would return real GDP to its potential at a price level of P_j while a nonintervention policy would return real GDP to its potential at a price level of P_h.
• D) A stabilization policy would return real GDP to its potential at a price level of P_h while a nonintervention policy would return real GDP to its potential at a price level of P_j.

---

Definitions:

Degrees Of Freedom

The number of values in a statistical calculation that are free to vary without violating the constraints of the calculation.

Critical Values

Specific points on the scale of a test statistic beyond which the null hypothesis is rejected in favor of the alternative hypothesis.

Two-Tailed

A hypothesis test that allows for the possibility of an effect in two directions, either less than or greater than a specified range.

Pearson Correlation

A statistical measure that evaluates the linear relationship between two continuous variables.