When Aggregate Demand Is High Enough to Drive Unemployment Below

question 119

Multiple Choice

When aggregate demand is high enough to drive unemployment below the natural rate,

• A) there is downward pressure on the price level,and the government may want to conduct contractionary fiscal policy.
• B) the economy is slipping into a recession,and the government may want to conduct expansionary fiscal policy.
• C) there is upward pressure on the price level,and the government may want to conduct contractionary fiscal policy.
• D) there is upward pressure on the price level,and the government may want to conduct expansionary fiscal policy.
• E) there is downward pressure on the price level,and the government may want to conduct expansionary fiscal policy.

---

Definitions:

Total Cost

The total of all costs associated with the creation of products or services, encompassing both fixed and variable expenses.

Marginal Cost

The financial outlay for generating an additional unit of a good or service.

Profit Maximizing Price

The price at which a company can sell its product to maximize its profit, balancing between too high to deter consumers and too low to cover costs.

State Government

The government of a specific state within a country, responsible for governing matters not reserved by the federal government.