If Weak Aggregate Demand Is Pushing the Economy into Recession,which

question 151

Multiple Choice

If weak aggregate demand is pushing the economy into recession,which of the following must be true?

• A)The economy is at an equilibrium that is on the long-run aggregate supply curve.
• B)The economy is at an equilibrium that is on the long-run Phillips curve.
• C)The economy is at an equilibrium that is not on the long-run Phillips curve.
• D)Contractionary monetary policies will push the economy back to the long-run Phillips curve.

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Definitions:

Perfectly Competitive

A market structure characterized by a large number of small firms, a homogeneous product, perfect information, and free entry and exit.

Elastic

A term used to describe a good's demand sensitivity to changes in price; highly elastic means demand changes significantly with price changes.

Industry Output

The total production of goods and services produced by an industry within a specific period.

Long-run Cost Function

The relationship between output quantity and total cost when all inputs, particularly capital, can be varied to minimize cost.