When an Economy Has Debt Deflation

question 238

Multiple Choice

When an economy has debt deflation:

• A)aggregate demand increases, since the real debt burden is reduced.
• B)aggregate demand is not affected, since real variables are not affected.
• C)aggregate demand decreases as borrowers' real debts increase, which leads to less spending.
• D)the economy moves quickly to its potential output.

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Definitions:

Self-criticism

The process of evaluating one's own behaviors and performance critically.

Negative Thinking

A cognitive process where individuals perceive or anticipate situations in a more pessimistic or disadvantageous light than they objectively are.

Biological Predispositions

Innate tendencies or propensities in individuals that may influence their behaviors, preferences, or susceptibility to certain conditions.

Diathesis

Diathesis refers to a predisposition or vulnerability to developing a certain disorder or condition based on genetic or psychological factors, often interacting with environmental stressors.