Figure 1114 Alt Text for Figure 11

question 225

Multiple Choice

Figure 11.14 Alt text for Figure 11.14: In figure 11.14, a dynamic AD-AS model.
Long description for Figure 11.14: The x-axis is labelled, real GDP (trillions of 2007 dollars) .The y-axis is labelled, price level (CPI) .6 lines are shown; SRAS1, SRAS2, AD1, AD2, LRAS1, and LRAS2.Line SRAS1 begins near the bottom left corner and slopes up to the top right corner.Line SRAS2 follows the same slope as line SRAS1, but is plotted to the right.Line AD1 begins at the top left corner and slopes down to the end of the x-axis.Line AD2 follows the same slope as line AD1, but is plotted to the right.Line LRAS1 is perpendicular to the x-axis and begins from x-axis value 1.7.Line LRAS2 is perpendicular to the x-axis and begins from x-axis value 1.9.Line LRAS1 intersects lines AD1 and SRAS1 at point A (1.7, 100) .Lines AD2 and SRAS2 intersect at point B (1.94, 104) .Points A and B are connected to their respective coordinates on the x-axis and y-axis with dotted lines.Line LRAS1 intersects line SRAS2 below point A.Line LRAS2 intersects lines SRAS1 and AD2 just above point B.
-Refer to Figure 11.14.In the dynamic AD-AS model, the economy is at point A in year 1 and is expected to go to point B in year 2, and the Bank of Canada pursues the appropriate policy.This will result in

• A)unemployment rates higher than what would occur if no policy had been pursued.
• B)inflation rates higher than what would occur if no policy had been pursued.
• C)potential real GDP levels lower than what would occur if no policy had been pursued.
• D)real GDP levels higher than what would occur if no policy had been pursued.
• E)long-term interest rates will be lower than if no policy had been pursued.

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Definitions:

Self-fulfilling Prophecy

A self-fulfilling prophecy is a belief or expectation that influences behavior in a way that causes the belief to become true.

Directive Leadership

A leadership style characterized by giving direct orders and instructions, with a clear line of authority and control.

External Locus of Control

The belief that one's outcomes in life are determined by external forces or events outside their control, as opposed to being the result of their own actions (internal locus of control).

Path-goal Theory

A leadership theory that emphasizes the leader's role in guiding and motivating followers to achieve set goals by clarifying the path to these goals.