Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Country Beta will likely move away from Full Employment Equilibrium as demand decreases, leading to higher unemployment.
B
The economy will remain at Full Employment Equilibrium since output is not affected by external demand changes.
C
Country Beta will experience inflation as a result of reduced aggregate demand.
D
Full Employment Equilibrium will be achieved if the government increases taxes to reduce spending.
Understanding the Answer
Let's break down why this is correct
Answer
When a country like Beta faces a recession, it means that its economy is not doing well, and fewer people are working. The decline in exports means that businesses are earning less money, which leads them to cut back on production and lay off workers. This situation reduces the overall demand for goods and services in the economy, making it harder for people to find jobs. As a result, Country Beta moves away from Full Employment Equilibrium, where everyone who wants to work can find a job. For example, if a factory that exports toys has to shut down because fewer people are buying toys from abroad, many workers in that factory will lose their jobs, contributing to higher unemployment in Country Beta.
Detailed Explanation
When exports drop, people buy less. Other options are incorrect because Some might think that external demand changes don't matter; It's a common mistake to think lower demand causes inflation.
Key Concepts
Full Employment Equilibrium
Aggregate Demand
Unemployment
Topic
Full Employment Equilibrium
Difficulty
easy level question
Cognitive Level
understand
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