-Refer to the Above Figure

question 222

Multiple Choice

-Refer to the above figure. Unexpected contractionary monetary policy has caused the aggregate demand curve to shift to AD₂. In the long run

• A)the unemployment rate will be the same rate as before the contractionary monetary policy.
• B)the unemployment rate will be larger than the rate before the expansionary monetary policy.
• C)the unemployment rate will be smaller than the rate before the expansionary monetary policy.
• D)the unemployment rate can increase or decrease depending upon how much the LRAS will shift.

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Definitions:

Real GDP

Gross Domestic Product adjusted for inflation, measuring the value of goods and services produced in a country.

Aggregate Quantity

The total amount or volume of a particular good or service produced or consumed in a given period.

Aggregate Demand Curve

A graphical representation showing the relationship between the overall price level in the economy and the total demand for goods and services at that price level.

Real Output

The total value of all goods and services produced by an economy, adjusted for inflation, representing the actual productivity.