When a Long-Term Aggregate Supply Curve Is Drawn with Real

question 121

Multiple Choice

When a long-term aggregate supply curve is drawn with real GDP (Y) along the horizontal axis and the price level (P) along the vertical axis, this curve:

• A) slopes upward and to the right.
• B) slopes downward and to the right.
• C) is horizontal.
• D) is vertical.

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Definitions:

Depression

A deep and prolonged business downturn; the last one occurred in the 1930s.

Velocity of Circulation

The rate at which money moves through the economy, from transactions of individuals and businesses.

Unemployment Rate

A measure of the percentage of the labor force that is jobless and actively looking for employment.

Expansionary Monetary Policy

A policy by central banks to increase the money supply and decrease interest rates to stimulate economic growth.