A Government Might Want to Reduce Aggregate Demand If It

question 23

Multiple Choice

A government might want to reduce aggregate demand if it believes that:

• A) the economy is in long-run equilibrium.
• B) the economy is above the natural rate of unemployment.
• C) the economy is producing below full-employment output.
• D) the economy is expanding past its long-run capabilities.
• E) the economy is in a recession.

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Definitions:

Predictive Validity

The extent to which a score on a scale or test predicts future performance on a related outcome.

Concurrent Validity

A measure of how well a particular test correlates with a previously validated measure taken at the same time.

Construct Validity

The extent to which a test measures the theoretical construct or concept it is intended to measure.

Content Validity

A type of validity that examines how well a test samples a universe of items.