Figure 27-4 -In the New Classical Model in Figure 27-4,the Long-Run Effects

question 78

Multiple Choice

Figure 27-4
-In the new classical model in Figure 27-4,the long-run effects of an anticipated increase in aggregate demand that is less than expected ________.

• A) increases output from Yn to Y2, and the inflation rate from P1 to P2
• B) decreases output from Yn to Y5, and increases the inflation rate from P1 to P5
• C) does not change output and increases the inflation rate from P1 to P3
• D) does not affect the levels of real output or inflation

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Definitions:

Consideration

A concept in contract law, referring to something of value exchanged between parties that makes an agreement legally binding.

Contract

An agreement creating obligations enforceable by law between two or more parties.

Promissory Estoppel

A legal principle preventing a party from withdrawing a promise made to another party, especially if the latter has relied on that promise to their detriment.

Tort of Negligence

A legal claim arising from a breach of the duty of care that results in harm or loss to another person.