The Assumption That Aggregate Demand Determines Output Is Reasonable Because

question 17

Multiple Choice

The assumption that aggregate demand determines output is reasonable because

• A) firms generally operate with some excess capacity.
• B) firms usually maintain a supply of inventories.
• C) the natural rate of unemployment is between 5 and 6 percent.
• D) all of the above.
• E) none of the above.

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Definitions:

Savers

Individuals or organizations that set aside a portion of their income for future use, often by depositing it into financial accounts that earn interest.

Borrowers

Individuals or entities that receive funds from a lender under the condition of returning it typically with interest.

Legal Tender

The officially recognized form of money that must be accepted if offered in payment of a debt.

Federal Reserve Note

The official paper currency issued by the Federal Reserve in the United States, commonly known as the dollar.