If Wages and Prices Are Perfectly Flexible, a Decrease in Aggregate

question 38

Multiple Choice

If wages and prices are perfectly flexible, a decrease in aggregate demand will cause a(n) _____ in the price level and _____ in unemployment.

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

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Definitions:

Wholly Owned Subsidiary

A company whose entire stock is held by another company, making it completely controlled by the parent company.

Manufacturer

A type of business or company that produces finished goods from raw materials in large quantities for sale.

Present Value

The present worth of a future amount of money or series of cash flows, considering a certain interest rate.

Future Lease Payments

The amounts due over the lease term for the use of an asset.