Use the Following to Answer Questions

question 238

Multiple Choice

Use the following to answer questions
Figure: Aggregate Demand and Fiscal Policy
-(Figure: Aggregate Demand and Fiscal Policy) Refer to the figure.For an economy in a recession at point Z,what will happen in the long run in the absence of any government action to counter the recession?

• A) Wages will become flexible and spending growth will recover to increase aggregate demand,moving the economy to point X.
• B) Wages will remain sticky and aggregate demand will fall farther,moving the economy to point Y.
• C) Aggregate demand will rise above the LRAS curve,moving the economy to point W.
• D) The economy will remain in a recession at point Z.

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Definitions:

Capital Appreciation

An increase in the value of an asset or investment over time, not including the earnings from dividends or interest.

Limited Liability

A legal structure that limits the financial liability of investors or owners to the amount they have invested in a company.

Shareholders

Individuals or entities that own one or more shares of stock in a corporation, giving them rights to dividends and a say in company matters through voting.