In the Aggregate Demand/aggregate Supply Model, When the Output of an Economy

question 105

Multiple Choice

In the aggregate demand/aggregate supply model, when the output of an economy is less than its long-run potential, the economy will experience

• A) declining real wages and interest rates that will stimulate employment and real output.
• B) rising interest rates that will stimulate aggregate demand and restore full employment.
• C) a budget surplus that will stimulate demand and, thereby, help restore full employment.
• D) rising real wages and real interest rates that will restore equilibrium at a higher price level.

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Periods of significant decline in economic activity across the economy lasting longer than a few months.

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A period of training and work that an individual does for their country's armed forces, which can be voluntary or compulsory.

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