New Classical Economists Say That an Unanticipated Decrease in Aggregate

question 242

Multiple Choice

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

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

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Definitions:

Compounded Annually

Refers to the process of earning interest on both the initial principal and the accumulated interest from previous periods, calculated once per year.

Future Value

The estimated value of an investment or loan including interest or dividends, at a specific future date.

Ordinary Annuity

A series of matching financial discharges made at interval ends throughout a fixed term.

Compounded Monthly

The process of adding interest to the initial amount of a loan or deposit on a monthly basis, causing the total amount to grow at an increasing rate.