The Dynamic Aggregate Demand Curve Is Downward Sloping Because as Inflation

question 9

Multiple Choice

The dynamic aggregate demand curve is downward sloping because as inflation falls, the central bank reduces the nominal interest rate by more than the fall in the inflation rate, which _____the real interest rate and _____ the quantity of goods and services demanded.

• A) decreases; decreases
• B) decreases; increases
• C) increases; increases
• D) increases; decreases

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Definitions:

Probability

Probability is a measure of the likelihood that an event will occur, often expressed as a number between 0 and 1, where 1 indicates certainty.

Mutually Exclusive Event

Situations or events that cannot occur at the same time, meaning the occurrence of one event precludes the occurrence of the other.

Independent Event

An independent event is an event whose outcome is not influenced by the outcome of another event; in probability, this means that the occurrence of one event does not change the probability of another.

Standardized Z Values

Values resulting from the standardization process that measures the number of standard deviations a data point is from the mean of its distribution.