Suppose the Economy Is Initially in Equilibrium Where Real GDP

question 38

Multiple Choice

Suppose the economy is initially in equilibrium where real GDP equals potential GDP and the inflation rate is at the target rate.Other things equal,a housing boom will cause aggregate expenditures to increase,which will result in a new,short-run equilibrium.To return GDP to its potential level,the inflation rate will adjust.With adaptive expectations,this will result in

• A) an increase in aggregate demand and an increase in the inflation rate.
• B) a decrease in aggregate supply and an increase in the inflation rate.
• C) a decrease in aggregate demand and a decrease in the inflation rate.
• D) an increase in aggregate supply and a decrease in the inflation rate.

Identify how individual differences in risk aversion affect financial decisions and utility.

Understand the concept of a fair insurance policy and how it is determined.

Understanding the concept of fair and unfair insurance policies.

Calculating expected values and expected utility for uncertain income scenarios.

---

Definitions:

Flag

A marker or indicator, often used in programming, data analysis, or to signal attention in applications and documents.

Rules

Guidelines or protocols established to regulate behavior or procedures in a specific context.

Quick Parts

Features in Microsoft Office that allow users to create, store, and reuse pieces of content, including text, graphics, and formatting.

Building Blocks

Fundamental components or elements used as the foundation to build, create, or assemble more complex structures, systems, or pieces of work.