What Sequence of Events Results from a Decrease in Aggregate

question 186

Multiple Choice

What sequence of events results from a decrease in aggregate demand?

• A) The price level falls, inventories decline, firms respond by increasing output and employment.
• B) The price level falls, inventories increase, firms respond by reducing output and employment.
• C) The price level rises, inventories decline, firms respond by increasing output and employment.
• D) The price level rises, inventories increase, firms respond by increasing output and employment.

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Definitions:

Net Capital Losses

The result of selling a capital asset for less than its purchase price, which can be used to offset capital gains for tax purposes.

Corporations

Business entities that are legally recognized as individual entities, separate and distinct from their owners.

Par Value

The face value of a bond or stock as stated by the issuing company, which does not necessarily reflect its market value.

Earnings Distributed

Refers to the portion of a company's net income that is paid out to shareholders as dividends.