Which of the Following Will Most Likely Occur in the Short

question 112

Multiple Choice

Which of the following will most likely occur in the short run if long-run equilibrium is disturbed by an unanticipated decrease in aggregate demand?

• A) a decrease in output and a higher price level
• B) an increase in output and a higher price level
• C) a decrease in output and a lower price level
• D) an increase in output, while prices remain unchanged

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Definitions:

Risk Averse

A tendency to prefer certainty over uncertain outcomes to minimize exposure to financial loss.

Market Equilibrium

A situation in a market where the quantity supplied equals the quantity demanded at a certain price level, resulting in no net shortage or surplus.

Arbitrage Opportunities

Situations where a financial instrument or security can be simultaneously bought and sold in different markets at a price discrepancy to generate risk-free profit.

Portfolio Beta

Portfolio beta measures the sensitivity of a portfolio's returns to movements in the market index. A beta greater than one indicates higher volatility than the market, while a beta less than one indicates lower volatility.