A Reduction in Business Expectations, Combined with the Imposition of New

question 64

Multiple Choice

A reduction in business expectations, combined with the imposition of new tariffs by major trading partners, would have what effect on aggregate demand?

• A)​AD would increase.
• B)​AD would decrease.
• C)​AD would stay the same.
• D)​AD could either increase or decrease, depending on which change was of a greater magnitude.

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Definitions:

Predatory Pricing

A strategy where a company sets very low prices to eliminate competition and establish a monopoly in the market.

Tacit Collusion

An unspoken, implicit understanding among competitors to avoid certain competitive behaviors, such as price cutting.

Quantity-fixing Agreements

involve deals or arrangements between competing businesses to restrict output levels, aiming to influence market prices or conditions.

Price-leadership Model

A market strategy where one dominating firm sets the price for its product, and other firms in the industry follow suit, often observed in oligopolistic markets.