An Increase in Aggregate Demand Is Most Likely to Cause

question 142

Multiple Choice

An increase in aggregate demand is most likely to cause an increase in the price level when the economy is

• A)operating near full employment.
• B)on the horizontal part of the aggregate supply curve.
• C)operating with high unemployment.
• D)operating with substantial excess capacity.

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Definitions:

Nobel Prize

A set of international awards given annually in several categories including Peace, Literature, and various sciences, recognizing significant contributions to humanity.

Herbert Simon

An American economist, political scientist, and cognitive psychologist known for his research in the fields of decision-making and artificial intelligence, including the concept of "bounded rationality."

Assumptions

Accepted beliefs or statements taken to be true without proof, often serving as starting points for reasoning and decision-making processes.

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