Aggregate Demand Has Fallen So That GDP Is Below Its

question 40

Multiple Choice

Aggregate demand has fallen so that GDP is below its potential. Prices begin to fall. The next step in describing the dynamics of the effect of a reduction in investment is

• A) a return of investment to its original level in direct response to the falling prices.
• B) a decline in the interest rate to maintain equality of supply and demand in the money market.
• C) a decline in the real) supply of money, caused by the falling prices.
• D) an increase in the demand for money as people respond to the expectation of lower inflation.
• E) none of the above.

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Definitions:

Reinforcement

A stimulus or event that increases the likelihood of a behavior being repeated, it can be positive (adding) or negative (removing).

Shaping

Shaping is a method of training by which successive approximations toward a desired behavior are reinforced.

Primary Reinforcement

A reinforcer that satisfies a basic biological need or desire, such as food, water, or sleep, which is inherently motivating.

Secondary Reinforcement

A type of reinforcement where a stimulus gains its reinforcing power through its association with a primary reinforcer.