A) change in aggregate demand.
B) change in the aggregate quantity of good and services demanded.
C) determinant of aggregate demand.
D) revealed expenditure on aggregate demand.
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Correct Answer
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A) The increase in the price level to Pb reduces real GDP demanded, shifting the aggregate demand curve back to AD1, returning the economy to its potential output at A.
B) Firms produce more in anticipation of future higher prices, thus shifting the SRAS curve upward until the gap is eliminated at D.
C) Firms and workers will negotiate higher nominal wages to restore lost purchasing power. This shifts the SRAS curve to the left until the gap is eliminated at D.
D) The increase in the price level to Pb decreases consumption which in turn leads firms to cut production shifting the SRAS curve to the left until the gap is eliminated at D.
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Correct Answer
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A) there is insufficient demand for goods and services.
B) there is insufficient supply of goods and services.
C) wages and prices are fully flexible.
D) wages and some prices have not adjusted sufficiently to maintain output at its potential level.
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Correct Answer
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A) gives rise to a vertical long-run aggregate supply curve.
B) gives rise to a vertical short-run aggregate supply curve.
C) creates a surplus or a shortage of real GDP.
D) prevents the economy from producing its potential level of real GDP.
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A) domestic purchases of foreign goods.
B) the demand for money by households and firms.
C) the real purchasing power of household wealth.
D) the level of income.
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Correct Answer
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A) I only
B) I and II only
C) I and III only
D) I, II, and III
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Correct Answer
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