Which of the Following Is Most Likely to Occur If

question 74

Multiple Choice

Which of the following is most likely to occur if the central bank of a country decides to boost aggregate demand in response to a temporary supply shock?

• A) The economy will experience deflation.
• B) The level of output in the economy will fall further.
• C) The aggregate demand curve will shift to the left.
• D) The level of inflation in the economy will increase further.

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Definitions:

Payback Period

The length of time required to recover the initial outlay on an investment based on its expected cash flows.

Annual Cash Flows

The net amount of cash and cash-equivalents being transferred into and out of a business during a given fiscal year.

Net Present Value

A method used in capital budgeting to assess the profitability of an investment or project, calculated as the difference between the present value of cash inflows and outflows over a period of time.

Yearly Cash Inflows

The total amount of money received by a company over a year, from various sources including sales, investments, and financing.