According to Keynesian Theory,if Equilibrium Real GDP Is Below the Full-Employment

question 135

Multiple Choice

According to Keynesian theory,if equilibrium real GDP is below the full-employment level,then an increase in aggregate demand will result in which of the following changes in equilibrium?

• A) Real GDP will rise, but the price level will remain constant.
• B) Real GDP and the price level will both rise.
• C) Real GDP will remain unchanged but the price level will rise.
• D) None of the above.

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Definitions:

Hedge

An investment made to reduce the risk of adverse price movements in an asset.

Speculative Forward Contract

A financial derivative used to speculate on the future price of an asset, involving an agreement to buy or sell the asset at a future date for a price determined today.

Fair Value Hedge

A risk management technique that uses financial instruments to mitigate the risk associated with changes in the fair value of an asset or liability.

Firm Commitment

An agreement between a buyer and an underwriter in which the underwriter guarantees the sale of a certain amount of securities.