Aggregate Demand and Supply Analysis

question 37

Multiple Choice

Aggregate Demand and Supply Analysis

-In the figure above, assume that output is $10.5 trillion, while potential output is $12 trillion. Suppose that a combination of fiscal stimulus and recovery of consumer and business confidence shifts the IS and AD curves, as shown in the figure, while monetary policy sets the real interest rate at one percent. If the short-run aggregate supply curve is π = Y - 13, then the resulting values of output and inflation are ________.

• A) $12 trillion & 3 percent
• B) $13.5 trillion & 5 percent
• C) $9.75 trillion & 0 percent
• D) $13.5 trillion & 0 percent
• E) $12.5 trillion & 2 percent

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Definitions:

Supertasters

Individuals who have a heightened sensitivity to tastes, particularly the sensations of bitterness and sweetness.

Taste Buds

Specialized sensory receptors for taste that are located on the tongue and in the lining of the mouth.

Slow Pain Pathway

The neural pathway in the body that is responsible for transmitting chronic, dull, aching pain sensations to the brain.

Unmyelinated Neurons

Unmyelinated neurons are nerve cells that lack a myelin sheath around their axon, resulting in slower transmission of nerve impulses compared to myelinated neurons.