Within the AD/AS Model, Which One of the Following Adjustments

question 89

Multiple Choice

Within the AD/AS model, which one of the following adjustments will cause the economy to return to its long-run capacity when output is temporarily greater than the economy's long-run potential?

• A) Lower wage rates and resource prices reduce short-run aggregate supply.
• B) Lower interest rates increase aggregate demand and, thereby, stimulate output.
• C) Higher wage rates and resource prices reduce short-run aggregate supply.
• D) A decrease in prices reduces aggregate demand.

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Definitions:

Externalities

Economic impacts of a product or service on parties who do not directly participate in the transaction, which can be negative (pollution) or positive (vaccination benefits).

Referent Power

A form of influence based on the charisma and interpersonal appeal of the leader, rather than on formal authority.

Positive Relationship

A connection between two or more entities characterized by mutual respect, cooperation, and beneficial outcomes for all involved.

Coercive Power

The ability of a person or organization to force others to comply with demands or orders through threats or punishment.