A Reduction of Aggregate Demand May Raise the Natural Rate

question 5

Multiple Choice

A reduction of aggregate demand may raise the natural rate of unemployment above the full employment level,meaning that the self-correcting mechanism will only be able to return the economy to the natural rate level of output and unemployment-not to the full employment levels.Such a view is consistent with

• A)monetarism.
• B)hysterisis.
• C)Keynesianism.
• D)real business cycle theory.

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Definitions:

Depression

A common and serious mood disorder that negatively affects how you feel, think, and handle daily activities, often characterized by persistent feelings of sadness and loss of interest.

Future Loss

The potential for an individual or entity to experience a decrease in value or benefit in the future.

Normal Depression

A temporary state of sadness or low mood that is considered within the range of normal human emotional responses.

Adaptive Function

Refers to the psychological characteristics and behaviors that effectively respond to environmental challenges, therefore contributing to an individual's survival and reproductive fitness.