New Classical Economists Say That a Fully Anticipated Increase in Aggregate

question 193

Multiple Choice

New classical economists say that a fully anticipated increase in aggregate demand

• A) shifts the long-run aggregate supply curve to the right.
• B) shifts the long-run aggregate supply curve to the left.
• C) moves the economy up along its vertical long-run aggregate supply curve.
• D) eventually results in a self-correcting decrease in aggregate demand.

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Definitions:

Competitive Market

A market structure characterized by a large number of buyers and sellers, freedom of entry and exit, and a product that is homogeneous across suppliers, where no single buyer or seller can influence the market price.

Sellers

Individuals or entities that offer goods or services to buyers in exchange for money or other valuable consideration.

Market Failure

A situation in which the allocation of goods and services by a free market is not efficient, often leading to a net societal welfare loss.

Side Effects

Unintended consequences or secondary effects resulting from an action or decision, often seen in medicine, economics, and environmental policy.