Refer to the Above Graph

question 73

Multiple Choice

Refer to the above graph. Assume that the economy is in initial equilibrium where AD₁ intersects AS₁. If there is a decrease in aggregate demand to AD₂, then according to mainstream economists, if prices and wages are not flexible, this will result in an equilibrium at point:

• A) E
• B) B
• C) C
• D) D

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Definitions:

Tradition

The transmission of customs, beliefs, and cultural practices from one generation to another, often serving as a cornerstone for community identity and continuity.

Rationalization

The process of replacing traditions, values, and emotions as motivators for behavior in society with concepts based on efficiency and logic.

Iron Cage

A concept by Max Weber describing the increased rationalization inherent in social life, particularly in Western capitalist societies, leading to individuals feeling trapped by systems and bureaucracies.

Max Weber

A German sociologist, philosopher, and political economist whose works significantly influenced social theory and the discipline of sociology.