A Decrease in Aggregate Demand and the Subsequent Cutbacks in Production

question 55

Multiple Choice

A decrease in aggregate demand and the subsequent cutbacks in production lead to:

• A) frictional unemployment.
• B) cyclical unemployment.
• C) cost-push unemployment.
• D) structural unemployment.

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Definitions:

Well-Established Firms

Companies that have been in operation for a long time and have a firm position in the market.

Interest-Rate Cost-Of-Funds

The cost incurred by financial institutions to borrow funds, which influences the interest rates they charge for loans and mortgages.

Perfectly Elastic

A situation in market economics where the quantity demanded or supplied of a good changes infinitely in response to any change in price.

Market Interest Rates

The prevailing rates at which borrowers can obtain loans and lenders can offer loans in the financial market, depending on supply and demand dynamics.