During a Recession, Policy Makers Who Use the AS/AD Model

question 44

Multiple Choice

During a recession, policy makers who use the AS/AD model would probably recommend an open market:

• A)sale of government securities that reduces interest rates.
• B)purchase of government securities that reduces interest rates.
• C)sale of government securities that raises interest rates.
• D)purchase of government securities that raises interest rates.

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Definitions:

Supply

The total amount of a good or service available for purchase at any given price level in a given market.

Inelastic

Describes a situation where the demand or supply for a good or service is not significantly changed by variations in price.

Elastic

Describes a situation in which the demand or supply for a good or service significantly changes in response to a change in price.

Coefficient

A numerical or constant factor in an equation that multiplies the variable, indicating the degree or level of some effect.