Aggregate Demand and Supply Curves Have Been Widely Used to Analyze

question 111

Multiple Choice

Aggregate demand and supply curves have been widely used to analyze the performance of the macroeconomy. Figure 5-3 shows four diagrams that represent different changes in the macroeconomy. Choose the diagram that best represents the situations described in the following questions. Figure 5-3  

Which graph in Figure 5-3 best represents the aggregate demand-induced Great Depression of the 1930s?

• A) 1
• B) 2
• C) 3
• D) 4

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Definitions:

Inverted Yield Curve

A rare financial situation where long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality.

Short-Term Interest Rates

Interest rates applicable on loans or financial instruments that are due for payment within a short timeframe, typically less than one year.

Long-Term Interest Rates

Interest rates applied to loans or financial assets that are due for repayment in a period longer than one year.

Risk Premiums

The additional return demanded by investors for taking on higher risk, over and above the risk-free rate of return.