The AD-AS Model Depicts a Self-Correcting Economy

question 115

Multiple Choice

The AD-AS model depicts a self-correcting economy.This means that the price level in the model adjusts automatically in response to a(n) ___________ gap,so as to eliminate the ___________ gap in the long run,without requiring any help from government policies.

• A) output;output
• B) recessionary;recessionary
• C) expansionary;expansionary
• D) recessionary;expansionary
• E) expansionary;recessionary

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Definitions:

Financial Markets

Platforms or environments where buyers and sellers trade financial securities, commodities, and other fungible items of value.

Behavioral Finance

Behavioral Finance studies how psychological influences and biases affect the financial behaviors of investors and financial practitioners.

Vanguard 500 Index Fund

The Vanguard 500 Index Fund is a mutual fund providing investors with exposure to 500 of the largest U.S. companies, mirroring the performance of the S&P 500 Index.

Arbitrage

Arbitrage refers to the practice of buying and selling an identical asset across diverse markets simultaneously to capitalize on differing prices.