Suppose Aggregate Demand in the Economy Sharply Declines

question 122

Multiple Choice

Suppose aggregate demand in the economy sharply declines. Mainstream economists say that the price level (at least for a time) will _______ and real output will _________.

• A) decrease; remain constant
• B) increase; remain constant
• C) remain constant; decrease
• D) remain constant; increase

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Definitions:

Exercise Price

The predetermined price at which the holder of an option can buy (call) or sell (put) the underlying asset.

Split Factor

A term used in finance to describe the ratio by which a company's existing shares are divided into a larger number of shares, affecting a stock's price by making it more affordable without changing the company's market capitalization.

American Call Option

A type of call option that can be exercised at any time up to the expiration date, giving the holder the right to buy the underlying security at the strike price.

Exercise Price

The cost at which an option's holder has the right to purchase or sell the asset underlying the option.