Question 1
Refer to the information provided in Figure 29.2 below to answer the question(s) that follow.
Refer to Figure 29.2. If the economy is currently at Point
B and policy makers implement a policy which decreases the aggregate demand curve to
AD
1
◦ the price level will rise.
◦ the price level will fall.
◦ GDP will rise.
◦ the inflation rate will rise.
Question 2
Refer to the information provided in Figure 29.2 below to answer the question(s) that follow.
Refer to Figure 29.2. If the economy is currently at Point
A and policy makers implement a policy to increase aggregate demand, the time the economy needs to make the adjustment is known as the
◦ implementation lag.
◦ recognition lag.
◦ response lag.
◦ frictional lag.
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