The Equilibrium Aggregate Expenditure Model

question 11

Multiple Choice

The equilibrium aggregate expenditure model:

• A) can explain why an economy should always be at the natural rate of GDP.
• B) illustrates how government always moves an economy towards equilibrium GDP.
• C) illustrates how an economy can achieve equilibrium below the natural rate of GDP.
• D) proves that an economy will always tend towards the natural rate of GDP.

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Definitions:

Removal

The act of taking something away or off from the position occupied.

Disappearance

The act of someone going missing, either by intent or through unforeseen circumstances, leading to uncertainty about their whereabouts and well-being.

Avoidance

A defense mechanism involving keeping away from stressful situations or distressing thoughts and feelings to minimize anxiety or discomfort.

Systematic Desensitization Therapy

A behavioral therapy technique designed to reduce phobic or anxiety responses through gradual exposure to the feared object or situation, combined with relaxation exercises.