Consider the Basic AD/AS Macro Model in Long-Run Equilibrium

question 53

Multiple Choice

Consider the basic AD/AS macro model in long-run equilibrium.A negative AS shock will ________ the price level and ________ output in the short run.In the long run,the price level will ________ and output ________.

• A)decrease; decrease; decrease further; will decrease further
• B)decrease; decrease; decrease further; will be restored to potential output
• C)increase; decrease; decrease; will be restored to potential output
• D)increase; decrease; increase further; will be restored to potential output
• E)increase; increase; increase further; will be restored to potential output

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Definitions:

Precommitment Device

A strategy or mechanism used to constrain one's future actions or decisions to help achieve a long-term goal or avoid impulsive behavior.

Behavioral Economists

Researchers in economics focusing on how psychological, cognitive, emotional, cultural, and social aspects influence the economic choices made by individuals and institutions.

Availability Heuristic

A mental heuristic that uses the most readily accessible examples in someone's memory to appraise a specific area, concept, technique, or decision-making process.

Behavioral Economists

Scholars who study the effects of psychological, cognitive, emotional, cultural, and social factors on the economic decisions of individuals and institutions.