A Decrease in Aggregate Demand Will Cause

question 346

Multiple Choice

A decrease in aggregate demand will cause

• A) prices to fall according to classical economists, and unemployment to increase according to Keynes.
• B) prices to fall and unemployment to increase according to both classical economists and Keynes.
• C) aggregate supply to fall according to classical economists, and prices to fall according to Keynes.
• D) aggregate supply to fall according to Keynes, and unemployment to increase according to classical economists.

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Definitions:

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan remaining.

Intertemporal Arbitrage

The action of taking advantage of price differences of the same asset in different time periods to generate profits.

Oil

A viscous liquid derived from petroleum, natural gas, or plants, used as fuel or as a base for lubricants and various manufacturing processes.

Interest Rate

The part of a loan affected by interest charges to the borrower, often expressed as an annual percentage of the loan's outstanding total.