Use the Following Graph to Answer the Following Questions

question 115

Multiple Choice

Use the following graph to answer the following questions.The graph depicts an economy where aggregate demand and long-run aggregate supply (LRAS) have decreased,with no change in short-run aggregate supply (SRAS) .

-The decline in housing prices contributed to the Great Recession,as depicted in the graph,in that it

• A) caused real gross domestic product (GD
• P)and the price level to increase.
• B) caused an increase in oil and gas prices,which led to inflation.
• C) caused a decrease in household wealth and created a crisis in the loanable funds market.
• D) caused an increase in household wealth and a crisis in the loanable funds market.
• E) prevented unemployment from rising above historical averages.

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Definitions:

Pure Chase Strategy

A demand matching or production strategy where output is adjusted to match the demand exactly, with no inventory buffer.

Demand Requirements

The specific quantities of products or services that a market or customer base needs over a particular period.

Pure Level Strategy

A production strategy where the output levels are kept constant despite fluctuating demand, aiming at minimizing changes in production rates.