The reduction in aggregate demand caused by deflation:
A. further reduces prices, causing a deflationary spiral.
B. will decrease production and increase prices, causing inflation to adjust the price level.
C. further reduces prices, causing aggregate supply to shift left back to long-run equilibrium.
D. will decrease production and increase prices, causing a deflationary trap.
A. further reduces prices, causing a deflationary spiral.
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Refer to Figure 11.4. Which diagram illustrates the effect of a decrease in government spending?
A) A B) B C) C D) D
All of the following were took place during the German hyperinflation in the 1920s EXCEPT
A) banks reduced lending. B) some banks only made loans to customers who agreed to repay in terms of foreign currencies or commodities. C) Deutsche Bank had to lay off many workers due to lack of business. D) households and firms increased their demand for loans.
Refer to Figure 10.2. Assume the economy is initially at equilibrium at potential GDP of $500 billion. If the MPC = 0.80 , and real GDP falls to Y2 = $400 billion, the vertical distance between AE1 and AE2 must be
A) $8 billion. B) $20 billion. C) $80 billion. D) $100 billion.
Technological advances in pollution reduction:
A. reduce the demand for pollution permits. B. increase the demand for pollution permits. C. reduce the supply of pollution permits. D. increase the supply of pollution permits.