Within the AD/AS Model, If Consumers Increase Their Savings and Cut

question 179

Multiple Choice

Within the AD/AS model, if consumers increase their savings and cut back on their spending, the

• A) natural rate of unemployment will increase.
• B) real interest rate will decrease and, thereby, cushion the reduction in consumption spending.
• C) real interest rate will increase because of the higher rate of saving.
• D) long-run aggregate supply will decrease to restore equilibrium.

---

Definitions:

Adaptive Value

The extent to which a trait or behavior increases the odds of survival and reproduction for an organism in its environment.

Classical Conditioning

The educational process of repeatedly combining two stimuli; a reaction that initially occurs in response to the second stimulus eventually happens in response to the first stimulus alone.

Scientific Methodology

A systematic approach to research in which a problem is identified, relevant data are gathered, a hypothesis is formulated from these data, and the hypothesis is empirically tested.

Ivan Pavlov

A Russian physiologist known for his work in classical conditioning, particularly his experiments with dogs, leading to the concept of the Pavlovian response.