Expected Deflation Can Reduce Aggregate Demand by

question 30

Multiple Choice

Expected deflation can reduce Aggregate demand by

• A)reducing the purchasing power of money.
• B)reducing the willingness to purchase big-ticket items.
• C)increasing nominal interest rates.
• D)reducing the government's budget deficit.

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Definitions:

Import Quota

A limit set by a government on the quantity of a specific good that can be imported into the country.

Interest Rate

The amount charged by lenders to borrowers for the use of money, expressed as a percentage of the principal per period of time.

Open-Economy Macroeconomic Model

A model that analyzes an economy that interacts freely with other economies around the world, focusing on trade and financial flows.

Government Budget Deficit

Represents the financial situation in which a government's expenditures exceed its revenues within a specific period, leading to borrowing or debt accumulation.