A Shock to Aggregate Demand Can Be Created

question 19

Multiple Choice

A shock to aggregate demand can be created

• A) only by a shock to some element of the IS curve.
• B) only by a shock to some element of the LM curve.
• C) by a shock to either the IS curve or the LM curve.
• D) by a shock to inflationary expectations that moves the price-adjustment schedule.
• E) whenever some endogenous change in government spending policy is observed.

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Definitions:

Cost Of Capital

The rate of return a company must earn on its investments to maintain its market value and attract funds.

Lump Sum

A one-time payment made for a particular purpose, rather than recurring payments over time.

Future Value

The amount of money an investment is expected to grow to over a period of time when interest or dividends are reinvested.