Imagine That the Economy Is at a Point That Is

question 39

Multiple Choice

Imagine that the economy is at a point that is below both AA and DD, where both the output and asset markets are out of equilibrium. Which first action is TRUE?

• A) The economy will stay at this level in the short run.
• B) The exchange rate will first rise to a point on the AA schedule.
• C) The exchange rate will first rise to a point on the DD schedule.
• D) The AA-DD equilibrium will shift to the position of the economy.
• E) The output level will first increase to a position on the DD schedule.

---

Definitions:

Modernization

A process of social and cultural change that is initiated by industrialization and followed by increased social differentiation and division of labor.

Culture Lag

The phenomenon wherein certain parts of a culture may evolve more rapidly than others, leading to social conflicts and mismatches between technology and societal norms.

Functionalists

Sociologists who focus on the ways in which societal structures and institutions function to maintain society's stability and coherence.

Division of Labor

This term refers to the assignment of different parts of a manufacturing process or task to different people in order to improve efficiency.