Exhibit 10.4 -Refer to Exhibit 10.4, Which Shows an Aggregate Demand-Aggregate Supply

question 41

Multiple Choice

Exhibit 10.4

-Refer to Exhibit 10.4, which shows an aggregate demand-aggregate supply model. Which of these statements is true if the economy is at point M on SRAS₁₀₀?

• A) The actual price level is lower than expected, with a $200 billion expansionary gap.
• B) The actual price level is lower than expected, with a $200 billion recessionary gap.
• C) The actual price level is higher than expected, with a $200 billion recessionary gap.
• D) The actual price level is higher than expected, with a $200 billion expansionary gap.
• E) The economy is in equilibrium in the short run and the long run.

---

Definitions:

Truth-functional Compound

A compound statement whose truth value depends solely on the truth values of its components.

Quantifier

A logical tool that counts the instances within a discourse domain adhering to the conditions of an open formula.

Atomic Open Sentence

A type of statement in logic, which contains at least one variable, and becomes a proposition once the variables are replaced by specific values.

Compound

A substance formed from two or more elements chemically united in fixed proportions, or in logic, a sentence that combines two or more atomic sentences with logical connectives.