Assertion (A): Deficient demand can cause long-lasting involuntary unemployment.
Reason (R): With demand too low, the economy can settle at an equilibrium below full employment, with no force pushing output up.

Both A and R are true, and R is the correct explanation of A.Correct answerYour answerBoth A and R are true, but R is not the correct explanation of A.Correct answerYour answerA is true, but R is false.Correct answerYour answerA is false, but R is true.Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

At that equilibrium, firms sell all they produce, so they have no reason to hire more. R explains A.

Concept: Persistent unemployment
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsDeficient demand and the deflationary gap

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Assertion (A): Deficient demand can cause long-lasting involuntary unemployment.Reason (R): With demand too low, the economy can settle at an equilibrium below full employment, with no force pushing output up.

Explanation

Assertion (A): Deficient demand can cause long-lasting involuntary unemployment.
Reason (R): With demand too low, the economy can settle at an equilibrium below full employment, with no force pushing output up.