Exhibit 16.1 -Refer to Exhibit 16.1, Which Shows the Relationship Between an the Relationship

question 69

Multiple Choice

Exhibit 16.1

-Refer to Exhibit 16.1, which shows the relationship between an economy's potential output, price level, and real GDP. According to those who favor a passive approach to policy, the economy will attain equilibrium at potential output when _____

• A) the short-run aggregate supply curve shifts to the left.
• B) the short-run aggregate supply curve shifts to the right due to a fall in real wages.
• C) government spending increases.
• D) the money supply increases.
• E) aggregate demand decreases.

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Definitions:

Bretton Woods Agreement

An agreement established in 1944 which set up an international monetary system based on fixed exchange rates and established the International Monetary Fund (IMF) and the World Bank.

Net Indebtedness

The total amount of borrowed money minus assets or reserves, indicating a person's, company's, or country's financial obligations.

Factor Payments

Payments made to the factors of production, such as wages to labor, rent to landowners, interest to capital, and profits to entrepreneurs.

International Currency Markets

Global platforms for exchanging one country's currency for another's, influencing foreign exchange rates and international trade.