In the Basic AD/AS Macro Model, the "Paradox of Thrift

question 20

Multiple Choice

In the basic AD/AS macro model, the "paradox of thrift" is only a short- run phenomenon because

• A)consumers base their consumption expenditures only on their lifetime income.
• B)the marginal propensity to consume is fixed in the long run.
• C)savings are transformed into expenditures in the long run.
• D)in the long run output is determined by potential output.
• E)consumers exhibit cyclical consumption behaviour.

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Definitions:

Selective Attention

The process by which a person focuses on certain input while ignoring other stimuli.

Schizophrenia

A long-term mental disorder involving a breakdown in the relation between thought, emotion, and behavior, leading to faulty perception and inappropriate actions and feelings.

Early Adulthood

A stage of human development that occurs from the late teens through the twenties, marked by the pursuit of independence and identity.

Acute Schizophrenia

(Also called reactive schizophrenia) a form of schizophrenia that can begin at any age, frequently occurs in response to a traumatic event, and from which recovery is much more likely.