Use the Following Graph to Answer the Following Questions

question 142

Multiple Choice

Use the following graph to answer the following questions.The graph depicts an economy where aggregate demand has decreased.Note that long-run aggregate supply remains changed.

-The graph shows a decrease in the price level due to a decrease in aggregate demand.Real gross domestic product (GDP) ,however,does not change.If this were an accurate description of how an economy responds during a recession,which of the following would be an appropriate government response to a decrease in aggregate demand?

• A) The government should make an effort to control prices and limit inflation.
• B) The government should attempt to stimulate short-run aggregate supply.
• C) The government should take active steps to promote full employment.
• D) The government should let the economy adjust to full employment on its own.
• E) The government should restrict international trade and immigration.

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Definitions:

Business Loans

Credit facilities extended to businesses for various purposes, including capital expenditure, operational costs, and expansion activities, typically with repayment terms.

Disposable Income

The sum of money households can spend or save once income taxes have been deducted.

Saving

The process of setting aside a portion of current income for future use, typically to achieve long-term financial goals or provide a safety net.

Corporation's Capitalization

The total value of a corporation's issued shares of stock, debt, and other financial instruments, representing the company's funding structure.