According to Classical Theory, If the Aggregate Demand Curve Decreased

question 72

Multiple Choice

According to classical theory, if the aggregate demand curve decreased and the economy experienced unemployment, then:

• A) the economy would remain in this condition indefinitely.
• B) the government must increase spending to restore full employment.
• C) prices and wages would fall quickly to restore full employment.
• D) the supply of money would increase until the economy returned to full employment.

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Definitions:

Longer-Term Loans

Loans with a repayment period that extends beyond the typical short-term or intermediate-term period, often used for major investments.

Real Rate

The interest rate adjusted for inflation, reflecting the true cost of borrowing or the true return on investment.

Inflation

The rate at which the general level of prices for goods and services is rising and, subsequently, purchasing power is falling.

Medical Technology

The application of scientific and technological advances to the development of solutions and equipment that improve health conditions, diagnosis, and treatment of diseases.