In the View of Real-Business-Cycle Theory, an Increase in the Long-Run

question 36

Multiple Choice

In the view of real-business-cycle theory, an increase in the long-run aggregate supply would lead to a(n)

• A) increase in aggregate demand by an equal amount, so real output would increase and the price level would be unchanged.
• B) increase in aggregate demand by an equal amount, so real output and the price level would increase.
• C) decrease in aggregate demand, so real output would increase and the price level would decrease.
• D) decrease in aggregate demand, so real output and the price level would increase.

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Definitions:

Population Change Curve

A graph that shows how the size of a population changes over time.

Volatile

Characterized by rapid and unpredictable changes or fluctuations, often used to describe chemical substances that easily vaporize at normal temperatures or financial markets prone to rapid changes.

R-Selected Species

Species that produce a large number of offspring with a low probability of survival into adulthood, often adapting to unstable environments.

Biotic Potential

The peak reproductive potential of a life form when environmental conditions are ideal.