Within the Keynesian Aggregate Expenditure-Output Model, If an Economy Operates

question 104

Multiple Choice

Within the Keynesian aggregate expenditure-output model, if an economy operates below full employment:

• A) a reduction in wage rates and resource prices will soon restore full-employment equilibrium.
• B) a reduction in the real interest rate will soon restore full-employment equilibrium.
• C) an increase in the real interest rate will soon restore full-employment equilibrium.
• D) the economy may remain below full employment unless aggregate expenditures increase.

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Definitions:

Evaluating Decisions

The act of assessing the outcomes and implications of decisions made, often to learn from them and inform future decisions.

Decision Trees

A decision support tool that uses a tree-like model of decisions and their possible consequences, including chance event outcomes, resource costs, and utility.

Uncertainty of Demand

The unpredictability associated with the future demand for a product or service, making planning and forecasting challenging.

Flexible Production Capacity

The ability of a manufacturing process to adapt and respond to changes in demand by varying the amount of products produced without sacrificing efficiency or incurring significant costs.