Refer to the Diagram $A D _ { 1 }$ To $A D _ { 2 }$

question 133

Multiple Choice

Refer to the diagram. The real-business-cycle view of recession would best be described by

• A) a decrease of aggregate demand from \(A D _ { 1 }\) to \(A D _ { 2 }\), followed by a decrease in aggregate supply from \(\mathrm { AS } _\mathrm { LR 1} \) to \(\mathrm { AS } _\mathrm { LR 2} \).
• B) an increase in aggregate demand from \(A D _ { 1 }\) to \(A D _ { 2 }\), which in turn causes a decrease in aggregate supply from \(A S _ { \mathrm { LR } 1 }\) to \(A S _ { \mathrm { LR } 2 }\).
• C) a decrease in aggregate supply from \(\mathrm { AS } _ { \mathrm { LR } 1 }\) to \(\mathrm { AS } _\mathrm { LR2 }\), followed by a decrease in aggregate demand from \(A D _ { 1 }\) to \(A D _ { 2 }\).
• D) a decrease in aggregate supply from \(\mathrm { AS } _ { \mathrm { LR } 1 }\) to \(\mathrm { AS } _ { \mathrm { LR } 2 }\), followed by an increase in aggregate demand from \(A D _ { 2 }\) to \(A D _ { 1 }\).

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Definitions:

Probability Distribution

A mathematical function that provides the probabilities of occurrence of different possible outcomes for an experiment.

Economic Conditions

The current state of the economy, encompassing factors like inflation, unemployment rates, and growth rates.

Standard Deviation

Standard deviation is a measure of the dispersion or variability of a set of data points, indicating how much the individual data points differ from the mean value.

Stand Alone Risk

The risk associated with a particular investment or project considered in isolation from the rest of the portfolio or company's operations.