If an Unanticipated Reduction in Aggregate Demand Throws a Market

question 15

Multiple Choice

If an unanticipated reduction in aggregate demand throws a market economy into a recession,

• A) market forces will cause the economy to spiral downward and a lengthy period of depressed conditions is the expected result.
• B) lower real resource prices and interest rates will act as a stabilizing force and direct the economy back to its full employment potential.
• C) higher real resource prices and interest rates will help to direct a market economy back to its full employment potential.
• D) the natural rate of unemployment will rise until it is once again equal to the actual rate of unemployment.

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Definitions:

Injunctive Norms

Socially accepted rules or behaviors that are endorsed and expected by a group, influencing members' actions.

Centralized Communication

A form of communication structure in organizations where all decisions and processes flow through a central point of command.

Decentralized Communication

A mode of communication where messages are exchanged without a central control point, allowing for more direct and varied paths of information flow.

Balance Theory

A psychological theory suggesting that individuals seek consistency and balance among their beliefs, attitudes, and perceptions within a social context.