An Increase in the General Level of Prices in the Goods

question 121

Multiple Choice

An increase in the general level of prices in the goods and services market that is accompanied by a short-run reduction in real GDP is most likely caused by

• A) an unanticipated decrease in aggregate demand.
• B) an unanticipated increase in aggregate demand.
• C) a favorable supply shock that shifts SRAS to the right.
• D) an unfavorable supply shock that shifts SRAS to the left.

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Definitions:

Distorted

Pertains to something that has been altered or misrepresented from its original form, often leading to a false or misleading perception.

Imagination Inflation

A phenomenon where imagining an event which never happened can increase confidence that it actually occurred.

False Memories

A psychological phenomenon where a person recalls something that did not happen or remembers it differently from how it actually occurred.

Hot-Air Balloon

A lighter-than-air aircraft consisting of a bag, known as an envelope, which contains heated air, and a gondola or basket for carrying passengers.