Starting from Long-Run Equilibrium in the Dynamic Model of Aggregate

question 78

Multiple Choice

Starting from long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, a five-period positive demand shock causes output to _____ until returning to the natural level in the long run.

• A) remain continuously above the natural level of output
• B) move above and then below the natural level of output
• C) remain continuously below the natural level of output
• D) move below and then above the natural level of output

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Definitions:

Spendthrifts

Individuals who spend money in an extravagant and uncontrolled manner.

Tightwads

Individuals who are excessively frugal, often to the point of foregoing necessary or beneficial expenditures out of an aversion to spending money.

Consumer Confidence

A measure of how optimistic or pessimistic consumers are about the overall state of the economy and their personal financial situation.

Exchange Rates

The value of one currency for the purpose of conversion to another, impacting international trade and economics.