The Diagram Below Shows an AD/AS Model for a Hypothetical

question 60

Multiple Choice

The diagram below shows an AD/AS model for a hypothetical economy which is initially in a short-run equilibrium at point A. FIGURE 24-6
-Refer to Figure 24-6.If the government takes no action to change the short-run macro equilibrium in this economy,then

• A)the AD curve will shift downward until it intersects with the AS curve at point E.
• B)the AD curve will shift upward until it intersects with the AS curve at point C.
• C)the AS curve will shift to the left until it intersects with the AD curve at point D.
• D)the AS curve will shift to the right until it intersects with the AD curve at point B.
• E)the AS curve can either shift to the right or left depending on the fiscal policy.

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Definitions:

Swap Contract

An agreement between two parties to exchange sequences of cash flows for a set period of time according to predetermined terms.

Forward Contract

An agreement customized for two individuals to either buy or sell a particular asset at a price decided upon for a future date.

Hedging

A strategy used to reduce or eliminate the risk of adverse price movements in an asset, often by taking an offsetting position in a related security.

Transformation Process

The series of actions or operations conducted in manufacturing or service environments that convert inputs into finished products or outcomes.