A Decrease in Aggregate Demand Is Harmful in the Short

question 43

Multiple Choice

A decrease in aggregate demand is harmful in the short run because ________ but not in the long run because ________.

• A) real wealth rises; real wealth falls
• B) wages increase; wages decrease
• C) the price level rises; output falls
• D) unemployment rises; the price level falls
• E) the price level falls; the unemployment rate rises

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Definitions:

Consumer Price Index

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, often used as an indicator of inflation.

Real Wages

The purchasing power of wages or salaries, adjusted for inflation, indicating the quantity of goods and services that can be purchased.

High School Diploma

A certification awarded upon the successful completion of a secondary education program, representing a basic level of learning.

College Graduate

An individual who has completed a course of study at a college or university and received a degree certifying their level of education.