Use the Following Graph to Answer the Following Questions

question 132

Multiple Choice

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

-In the graph,aggregate demand decreases,causing a decrease in the aggregate price level and real gross domestic product (GDP) ,just like during the Great Depression.If short-run aggregate supply had decreased by the same margin as aggregate demand,how would the economy have behaved differently?

• A) The price level would have increased and real GDP would not have changed.
• B) The price level would not have decreased and real GDP would have decreased by more.
• C) Both the price level and real GDP would have decreased by much more.
• D) The price level would have increased and real GDP would have decreased.
• E) Both the price level and real GDP would have increased.

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Definitions:

Hyperthymesia

An extremely rare condition where an individual possesses an extraordinarily detailed autobiographical memory, remembering an unusual number of life events.

Encoding

The process by which information is transformed into a format that can be stored in memory.

Retrieval

The process of recalling information, experiences, and memories stored in the brain.

Storage

The process of retaining encoded information over time in the memory.