Refer to the Graph Above

question 56

Multiple Choice

Refer to the graph above. Assume that the economy is initially in equilibrium at the intersection of AD₁ and AS₁. Suppose that there is economic growth which shifts AS₁ to AS₂. If the application of a monetary rule is designed to shift AD₁ to AD₃, but because of pessimistic business expectations AD₁ only shifts to AD₂, then mainstream economists would suggest that the actions to be taken to avoid deflation would be to implement a(n) :

• A) Expansionary fiscal policy and a tight money policy
• B) Contractionary fiscal policy and a tight money policy
• C) Expansionary fiscal policy and an easy money policy
• D) Contractionary fiscal policy and an easy money policy

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Definitions:

M/M/S

A model used in queueing theory representing a system with multiple servers where arrivals and service times are Poisson distributed and exponentially distributed, respectively.

Average Time

The mean value that represents the central tendency of a set of times, often used to summarize the typical amount of time required for a process.

Utilization Factor

A measure that assesses how effectively a production resource is used, typically comparing actual output to maximum possible output.

Poisson Distribution

A statistical probability distribution that expresses the probability of a given number of events occurring in a fixed interval of time or space when these events occur with a known constant mean rate and independently of the time since the last event.