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According to the AD/AS model, a sudden decrease in business confidence would cause what to happen in the short run?

Select one:

a.

the real growth rate to increase and the inflation rate to rise

b.

the real growth rate to decrease and the inflation rate to fall

c.

the real growth rate to increase and the inflation rate to fall

d.

the real growth rate to decrease and the inflation rate to rise

Which of the following best describes a recession?

Select one:

a.

A situation where the level of real GDP growth is positive, but slower than normal.

b.

When the economy experiences high inflation.

c.

Any time the unemployment rate is above 8%.

d.

A widespread contraction in economic activity visible in many variables including real GDP, real income, and employment.

A change in aggregate demand will cause a change in the growth rate of the economy in the short run if:

Select one:

a.

the change in AD is unexpected or prices are sticky

b.

people decide to work in the social interest instead of their self interest

c.

the government holds interest rates constant

d.

the change in AD is expected and prices are flexible

According to the AD/AS model, recessions are caused by:

Select one:

a.

both negative AD and negative real shocks

b.

negative real shocks

c.

negative aggregate demand shocks

d.

positive real shocks

If it takes people more time to make employment decisions, then a given negative economic shock will cause a decline in economic growth:

Select one:

a.

smaller in size but longer in duration.

b.

larger in size but shorter in duration.

c.

smaller in size and shorter in duration.

d.

larger in size and longer in duration.