The Table Given Below Reports the Inflation Rate in the U.S

question 81

Multiple Choice

The table given below reports the inflation rate in the U.S. and Canada for two years.
Table 8.1
$\begin{array}{|c|c|c|}\hline & \text { United States } & \text { Canada } \\\hline \text { Inflation Rate (year 1) } & 0 \% & 0 \% \\\hline \text { Inflation Rate (year 2) } & 0 \% & 3.6 \% \\\hline\end{array}$
-Refer to Table 8.1. Assume the exchange rate is fixed at 1.4 CAD (Canadian dollars) = 1 USD (United States dollars) . Between year 1 and year 2, what happens to the U.S. aggregate demand curve?

• A) There is a movement to the right along the AD curve.
• B) The AD curve shifts to the right.
• C) The AD curve becomes relatively elastic.
• D) The AD curve shifts to the left.
• E) There is a movement to the left along the AD curve.

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Definitions:

Analytic Thought

The process of using logic and critical reasoning to break down complex problems or ideas.

Hypothetical-Deductive Thinking

A form of reasoning which involves developing hypotheses based on what might logically occur, followed by deducing logical, testable inferences, primarily seen in scientific and mathematical problem-solving, characteristic of formal operational thought in adolescence.

Deductive Reasoning

The logical process of reasoning from one or more statements (premises) to reach a logically certain conclusion, moving from generalities to specific instances.

Intuitive Thought

A cognitive process that relies on immediate, instinctive judgements rather than rational analysis.