New Classical Economists Say That an Unanticipated Increase in Aggregate

question 237

Multiple Choice

New classical economists say that an unanticipated increase in aggregate demand first

• A) increases the price level and real output, and then reduces short-run aggregate supply such that the economy returns to the full-employment level of output.
• B) increases the price level and real output, and then increases long-run aggregate supply.
• C) increases long-run aggregate supply, and then increases the price level and real output.
• D) reduces short-run aggregate supply, and then reduces long-run aggregate supply.

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Definitions:

Nondiversifiable Risk

Risk factors common to the whole economy; also called market risk or systematic risk.

Diversifiable Risk

The risk associated with individual investments that can be reduced through diversification by investing in a variety of assets.

Unique Risk

Risk that is specific to a single asset or to a small group of assets, also known as unsystematic risk.

Unique Risk

Also known as unsystematic risk, it refers to the risk associated with a specific company or industry.