If the Aggregate Supply Curve Is Flat

question 161

Multiple Choice

If the aggregate supply curve is flat,

• A)expansionary fiscal or monetary policy will cause a good deal of inflation with little increase in real output.
• B)expansionary fiscal or monetary policy will buy large gains in real output at low cost in terms of inflation.
• C)a contractionary stabilization policy is an effective way to reduce inflation.
• D)decreasing the income tax will not shift aggregate demand.

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Definitions:

Encoding Specificity Principle

A principle in psychology that suggests the recall of information is improved when the conditions at the time of encoding (learning) are similar to the conditions at the time of retrieval (remembering).

Scuba Divers

Individuals trained to dive underwater using self-contained underwater breathing apparatus (SCUBA) for various purposes, including exploration, research, and recreation.

Underwater

Underwater refers to being submerged in water, or to the condition of owing more on a loan than the value of the property securing it.

Primacy Effect

A cognitive bias that results in a person remembering the first pieces of information encountered better than information presented later on.