If an Unanticipated Reduction in Aggregate Demand Throws a Market

question 15

Multiple Choice

If an unanticipated reduction in aggregate demand throws a market economy into a recession,

• A) market forces will cause the economy to spiral downward and a lengthy period of depressed conditions is the expected result.
• B) lower real resource prices and interest rates will act as a stabilizing force and direct the economy back to its full employment potential.
• C) higher real resource prices and interest rates will help to direct a market economy back to its full employment potential.
• D) the natural rate of unemployment will rise until it is once again equal to the actual rate of unemployment.

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