If the General Level of Prices Is Higher Than Business

question 103

Multiple Choice

If the general level of prices is higher than business decision makers anticipated when they entered into long-term contracts for raw materials and other resources, which of the following is most likely to occur?

• A) a recession
• B) output less than the economy's long-run potential
• C) a sharp reduction in imports
• D) an unemployment rate that is less than the economy's natural rate of unemployment

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Definitions:

Millennium

A period of one thousand years.

Federal Reserve Policy

The monetary policy actions by the Federal Reserve, aimed at influencing economic conditions, particularly interest rates and inflation.

Economic Downturn

A period of reduced economic activity characterized by declining GDP, falling incomes, and rising unemployment.

New Deal

Initiatives involving public works, financial reforms, and regulatory measures, launched by President Franklin D. Roosevelt in the 1930s in the United States, designed to assist in overcoming the effects of the Great Depression.