If the Aggregate Demand Curve Shifts in the Short Run

question 15

Multiple Choice

If the aggregate demand curve shifts in the short run moving the economy out of long-run equilibrium:

• A)the short-run aggregate supply curve will shift to bring it back into long-run equilibrium.
• B)the aggregate demand curve will eventually shift back once expectations are taken into account.
• C)inflation will always occur.
• D)None of these is true.

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Definitions:

Systematic Risk

The collective risk for all investments in a market or a specific part of the market that cannot be offset through diversification.

Unsystematic Risk

The danger linked to a certain company or sector that can be reduced by spreading investments across a varied portfolio.

Political Risk

The risk of loss faced by investors, corporations, and governments due to political decisions, unrest, or instability in a country.

Correlation Risk

Correlation risk is the risk of unexpected changes in the correlation between asset returns, affecting portfolio risk and valuation.