If Resource Suppliers and Demanders Find Out That Their Price

question 195

Multiple Choice

If resource suppliers and demanders find out that their price expectations were wrong,they will take corrective actions that will

• A)cause the economy to move away from the potential output level
• B)raise the unemployment level above the natural rate of unemployment
• C)shift the aggregate demand curve
• D)shift the short-run aggregate supply curve
• E)raise the actual price level

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Definitions:

Real Interest Rate

The rate of interest an investor expects to receive after allowing for inflation, providing a more accurate measure of investment value.

Nominal Risk-Free Rate

The rate of return on an investment without inflation taken into account, representing only the absolute interest amount.

Expected Inflation

The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling, as anticipated by consumers, businesses, and policymakers.

Stock Market Declines

Periods when stock prices are falling, leading to a decrease in the value of investment portfolios.