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:

Liabilities

Financial obligations or debts that an entity owes to others, which must be settled over time through the transfer of economic benefits including money, goods, or services.

Debits

Entries in accounting that represent an increase in assets and expenses or a decrease in liabilities, equity, and revenue.

Credits

Represents the amount of money or value added to an account or available for purchase on credit.

Accounting Period

A specific period of time used by businesses for accounting purposes to prepare financial statements, commonly a year or a quarter.