12. In a recession unemployment increases and worker incomes decrease. The natural tendency is for households and firms to hold tight to a budget. But Keynes argues this exacerbates the real problem which is inadequate aggregate expenditures. This apparent contradiction is known as a. The conflict of interests b. The budget response contradiction c. The paradox of thrift d. All of the above 13. Which of the following are possible explanations for a downward sloping aggregate demand curve? a. The real wealth effect b. The real exchange rate effect c. The real interest rate effect d. All of the above 14. Which of the following concepts is most closely related to the long run aggregate supply curve? a. The circular flow diagram b. The production possibilities curve C. National savings d. The establishment survey 15. The short run aggregate supply curve is upward sloping. What is the key variable that is fixed in the short run and explains the upward slope of the curve? a. Prices b. Production c. Interest rates d. Wages