Stabilization Policies Will Probably Be Needed to Deal with Unemployment

question 87

Multiple Choice

Stabilization policies will probably be needed to deal with unemployment if:

• A) aggregate demand falls and input prices are not "sticky."
• B) aggregate demand falls and input prices are "sticky."
• C) aggregate demand increases and input prices are not "sticky."
• D) aggregate demand increases and input prices are "sticky."

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Definitions:

Aggregate Expenditure Line

A relationship tracing, for a given price level, spending at each level of income, or real GDP; the total of C + I + G + (X - M) at each level of income, or real GDP.

Marginal Propensity

The ratio of the change in consumption to the change in income, indicating how much consumption will change with a change in income.

Real GDP

The measure of a country's economic output adjusted for price changes, providing a more accurate reflection of an economy's size and growth.

Inventory Adjustments

Changes made to the recorded amount of inventory to account for discrepancies, damages, losses, or theft.