Exhibit 15-3  Aggregate Demand and Supply Model Beginning at Equilibrium

question 99

Multiple Choice

Exhibit 15-3  Aggregate demand and supply model Beginning at equilibrium E₁ in Exhibit 15-3, when the government increases spending or cuts taxes the economy will experience:

• A) an inflationary recession.
• B) stagflation.
• C) cost-push inflation.
• D) demand-pull inflation.

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Definitions:

Contract Changes

Modifications or adjustments made to the terms, conditions, obligations, or rights within a contract between parties.

Behavior

The actions or reactions of an entity, often in response to its environment.

Moral Hazard

The situation in which an individual or entity is more likely to take risks because the potential costs will not be borne by them but by another party.

Efficient Behavior

Efficient behavior refers to actions that maximize the desired outputs or results with the least amount of wasted effort or resources.