If Strong Aggregate Demand Is Pushing the Economy Beyond Potential

question 229

Multiple Choice

If strong aggregate demand is pushing the economy beyond potential real GDP,which of the following must be true?

• A)The economy is at an equilibrium that is on the long-run aggregate supply curve.
• B)The economy is at an equilibrium that is on the long-run Phillips curve.
• C)The economy is at an equilibrium that is not on the long-run Phillips curve.
• D)Expansionary monetary policies will push the economy back to the long-run Phillips curve.

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Definitions:

Endorphins

Natural, pain-relieving chemicals produced by the body that also contribute to feelings of pleasure and well-being.

Opiate

A group of drugs derived from opium used for their analgesic, narcotic, and sedative properties, which can also lead to dependence and addiction.

Withdrawal Symptoms

The physical or psychological effects experienced when reducing or ceasing intake of a substance on which the body has become dependent.

Heavy Drinking

Consumption of alcoholic beverages in large amounts over a short period of time, often leading to health problems and social issues.