In the Basic Model That Includes the AD and LRAS

question 232

Multiple Choice

In the basic model that includes the AD and LRAS curves only, an increase in aggregate demand:

• A) increases the inflation rate and the growth rate.
• B) increases the inflation rate, but not the growth rate.
• C) decreases the inflation rate and increases the growth rate.
• D) decreases the inflation rate, but not the growth rate.

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Definitions:

Economic Decisions

Economic decisions involve choices about resource allocation, production, distribution, and consumption within an economy, often under conditions of scarcity.

Strong Influence

The significant impact or control one party may have over the actions, decisions, or opinions of another.

Consumer Behavior

The study of how individuals or groups select, purchase, use, and dispose of goods, services, ideas, or experiences to satisfy their needs and desires.

Clear Preferences

The concept in decision theory and economics where consumers or decision-makers have well-defined preferences, allowing for consistent choices among sets of alternatives.