Under New Keynesian Theory,a Correctly Anticipated Decrease in Aggregate Demand

question 125

Multiple Choice

Under new Keynesian theory,a correctly anticipated decrease in aggregate demand will lead to __________ in Real GDP and __________ in the price level.

• A) a decrease; a decrease
• B) no change; an increase
• C) no change; no change
• D) an increase; an increase
• E) an increase; no change

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Definitions:

Salvage Value

The predicted sale value of an asset at the end of its operational life.

Trade-In Allowance

The credit offered by a seller for an old item that is given as part of the payment for a new item, reducing the cash needed to complete the new purchase.

Accumulated Depreciation

This refers to the total amount of depreciation expense that has been recorded for an asset since it was acquired, reflecting its decrease in value over time.

Cash Price

The amount of money required to purchase a good or service using cash, as opposed to credit terms or financing.