Suppose That, as Expected, Aggregate Demand in the Economy Sharply

question 160

Multiple Choice

Suppose that, as expected, aggregate demand in the economy sharply declines. New classical economists say that the price level will _____________ and real output will ____________.

• A) fall; remain constant
• B) fall; fall
• C) remain constant; fall
• D) remain constant; rise

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Definitions:

Foreign Subsidiary

A company that is partially or wholly owned and controlled by a parent company but operates in a different country.

Accounting

The systematic recording, reporting, and analysis of financial transactions of a business.

Indirect Form

Often used in reporting cash flows, an approach that adjusts net income for changes in balance sheet accounts to derive cash flow from operating activities.

Exchange Rate

The value of one currency for the purpose of conversion to another. It determines how much of one currency can be exchanged for another currency.