ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Lower the base rate
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Raise the base rate
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Either A or B
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None of the above
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Detailed explanation-1: -Policy tools for stimulating the economy include interest rate cuts, government spending increases, and quantitative easing.
Detailed explanation-2: -The downswing of the business cycle towards a trough is called an economic contraction. It is associated with: decrease in production/output • increase in unemployment • decrease in wages • decrease in consumer spending.
Detailed explanation-3: -A contraction is a period when economic output declines. During this phase, the economy is producing fewer goods and services than it did before. When fewer goods and services are produced, fewer resources are used by firms-including labor.
Detailed explanation-4: -Definition: Recession is a slowdown or a massive contraction in economic activities. A significant fall in spending generally leads to a recession.