When Using the AD-AS Model to Understand Business Cycles, the Question

question 4

Multiple Choice

When using the AD-AS model to understand business cycles, the question, "what are the fundamental causes of business cycles?" can be thought of as the question:

• A)"what factors move the economy away from long-run equilibrium?"
• B)"what factors move aggregate demand and aggregate supply in different directions?"
• C)"what factors increase or decrease potential GDP?"
• D)"what factors increase or decrease the expected rate of inflation?"

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Definitions:

Capital Deepening

The increase in the amount of capital per worker, leading to higher productivity and possibly higher wages.

U.S. GDP Per Capita

A measure that divides the Gross Domestic Product of the United States by its total population, indicating the average economic output per person.

Average Rate

The mean value calculated by dividing the sum of rates by the number of rates, often used in finance to determine interest rates or growth rates.

Percent

Percent is a mathematical term describing a fractional number out of 100, used to denote proportions, rates, or comparisons.