If the Equilibrium Price Level Is 135 but the Actual

question 20

Multiple Choice

If the equilibrium price level is 135 but the actual price level is 120,then

• A)firms decrease their production because they cannot sell the output they produce.
• B)the quantity of real GDP demanded is less than the quantity of real GDP supplied.
• C)the quantity of real GDP demanded is greater than the quantity of real GDP supplied.
• D)aggregate demand will increase to restore equilibrium.
• E)aggregate demand will decrease to restore equilibrium.

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Definitions:

Moral Hazard

The situation in which an entity has the incentive to take undue risks because the cost of those risks will be borne, at least in part, by others.

Firm-Specific Risk

The risk associated with an individual company, which can be reduced through diversification in investment.

Market Risk

The possibility that investors might incur losses because of elements influencing the general performance of the financial markets.

Informationally Efficient

A market condition where all existing information is completely accounted for in stock prices, thereby eliminating the possibility of consistently securing above-average profits.