An increase in the price level means that
A) long-run aggregate supply has increased.
B) monetary policy has been contractionary.
C) the value of the dollar has increased.
D) the purchasing power of money has fallen.
D
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The economy has been compared to a supertanker on the ocean to make the point that
A) the larger the economy, the less it is influenced by other economies (the weather). B) it takes time for a policy change to overcome the economy's momentum and change its direction (as in steering an immense ship). C) a random shock affects all parts of the economy in the same way (as all of a ship rises or falls together with the waves). D) the larger the economy, the worse it is for the rest of the world when it goes into a recession (there is enough oil in a supertanker for a spill to stretch across the ocean).
Based on the figure below. Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at__ creating _____gap.
A. B; no output B. D; an expansionary C. B; recessionary D. D; a recessionary