ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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prices adjust slowly.
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prices adjust quickly.
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prices don’t send signals to producers and consumers.
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prices prevent economic coordination.
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Detailed explanation-1: -Every nation’s economy fluctuates between periods of expansion and contraction. These changes are caused by levels of employment, productivity, and the total demand for and supply of the nation’s goods and services. In the short-run, these changes lead to periods of expansion and recession.
Detailed explanation-2: -Inflation is the general rise in the prices of goods and services in an economy, over a period of time.
Detailed explanation-3: -Keynesians believe that, because prices are somewhat rigid, fluctuations in any component of spending-consumption, investment, or government expenditures-cause output to change. If government spending increases, for example, and all other spending components remain constant, then output will increase.
Detailed explanation-4: -An economic recovery occurs after a recession as the economy adjusts and recovers some of the gains lost during the recession. The economy then eventually transitions to a true expansion when growth accelerates and GDP starts moving toward a new peak.