If a Contractionary Gap Exists and Resource Prices Are Not

question 80

Multiple Choice

If a contractionary gap exists and resource prices are not flexible downward,the short-run aggregate supply curve will

• A)shift leftward to return the economy to its potential output
• B)shift rightward to return the economy to its potential output
• C)not shift leftward to return the economy to its potential output
• D)not shift rightward to return the economy to its potential output
• E)become the long-run aggregate supply curve

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Definitions:

Net Exports

The value of a country's total exports minus its total imports, representing the net trade of goods and services with foreign countries.

Price Level

The price level is an index that measures the average prices of goods and services across an economy, indicative of inflation or deflation.

Aggregate Demand Curve

A curve that shows the quantity of goods and services that households, firms, the government, and customers abroad want to buy at each price level.

Marginal Propensity

The additional amount that consumers are likely to spend out of an additional unit of income.