A Central Idea Behind the AD-AS Model Is That,during a Recession,the

question 26

Multiple Choice

A central idea behind the AD-AS model is that,during a recession,the price level will decline,which will boost aggregate demand and,thus,eliminate the recessionary gap without requiring any help from government policies.The decline in the price level is expected to boost aggregate demand because of

• A) the real-balances effect on consumption.
• B) the price effect.
• C) the foreign trade effect on net exports.
• D) the Fisher effect.
• E) a combination of the real-balances effect and the foreign trade effect.

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Definitions:

Gross Margin Percentage

A financial metric that represents the difference between sales and cost of goods sold, expressed as a percentage of sales.

Year 2

The second year in a sequence, often used in financial and operational planning or analysis.

Debt-to-Equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by shareholders' equity; it indicates the proportion of equity and debt the company is using to finance its assets.

Year 2

A reference to the second year in a given context, typically used in financial forecasting or product development timelines.