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External shocks to an economy include:

Disruptions in trade, wars, and natural disasters.

Which of the following are policy levers?

Government regulation, tax policy, and the availability of money

Aggregate demand:

Refers to the collective behavior of all buyers.

The value of output in constant prices is measured by:

Real GDP.

According to the real balances effect, when the price level:

Falls, cash is worth more and therefore people buy more.

Which of the following suggests that lower average prices stimulate more borrowing?

The interest rate effect

The inability of labor-force participants to find jobs is known as:


An increase in the average level of prices of goods and services is known as:


Fiscal policy includes:

An increase in taxes.

Which of the following could cause a recession?

A decline in aggregate demand

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