How Is the AA Schedule Derived

question 88

Multiple Choice

How is the AA schedule derived?

• A) The AA schedule has a positive slope because an increase in output leads to a depreciation of the currency.
• B) The AA schedule has a negative slope because an increase in output leads to a decrease in the domestic interest rate.
• C) The AA schedule has a negative slope because an increase in output leads to an increase in the domestic interest rate and a domestic currency appreciation.
• D) The AA schedule has a positive slope because an increase in the money supply leads to an increase in the domestic interest rate.
• E) The AA schedule has a positive slope because a decrease in output leads to a depreciation of the currency.

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Definitions:

Sectoral Shifts

Changes in the economic landscape that cause resources (like labor) to move from one industry or sector to another, often due to technological changes or globalization.

Frictional Unemployment

Short-term unemployment that occurs when transitioning between jobs or entering the workforce.

Unemployment Insurance

Unemployment insurance is a government program that provides temporary financial assistance to workers who have lost their jobs through no fault of their own.

Structural Unemployment

Joblessness arising from the restructuring of industries, usually caused by advancements in technology, instead of variations in market supply or demand.