Starting from a Situation of Full Employment, an Increase in Aggregate

question 84

Multiple Choice

Starting from a situation of full employment, an increase in aggregate demand creates ________ and ________ the price level.

• A) a recessionary gap; lowers
• B) a recessionary gap; raises
• C) a recessionary gap; does not change
• D) an inflationary gap; raises
• E) an inflationary gap; lowers

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Definitions:

Common-Sense

Pertains to sound practical judgment concerning everyday matters or a basic ability to perceive, understand, and judge things shared by nearly all people.

Belongingness Hypothesis

The theory suggesting that humans have an innate need to form and maintain strong, stable interpersonal relationships.

Interpersonal Relationships

The connections and associations formed between individuals based on social, emotional, or professional interaction.

Pervasive Need

An enduring and extensive requirement that affects many aspects of an individual's life, potentially influencing behavior and well-being.