At Low Levels of Output, the Economy Can Expand with Little

question 345

Multiple Choice

At low levels of output, the economy can expand with little or no increase in the overall price level because

• A) at low levels of output the aggregate supply curve is negatively sloped.
• B) people will be expecting the price level to fall.
• C) there is excess supply so prices are kept low.
• D) firms likely hold excess labor and capital, and production can be increased without causing input prices to increase.

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Definitions:

Putable Bond

A type of bond that allows the holder to sell the bond back to the issuer at a predetermined price before maturity.

Floating Rate

An interest rate that changes over time as it is tied to an underlying benchmark or index, commonly used in loans and bonds.

Bond Indenture

A legal contract between a bond issuer and bondholders, detailing the terms and conditions under which a bond is issued, including the interest rate, maturity date, and covenants.

Protective Covenants

Legal stipulations in loan agreements that aim to preserve the value of the collateral and ensure borrowers uphold specific conditions.