The effect on the aggregate demand of a decrease in the price level is represented by a/an _______________ the AD curve. upward movement along downward movement along upward shift of leftward shift of None of the above are correct
Question
The effect on the aggregate demand of a decrease in the price level is represented by a/an _______________ the AD curve.
upward movement along
downward movement along
upward shift of
leftward shift of
None of the above are correct
Solution
Answer: The aggregate demand (AD) curve shows the relationship between the price level and the quantity of real GDP demanded, holding everything else constant. When the price level decreases, consumers and firms are more likely to increase their spending because goods and services are relatively cheaper. This leads to an increase in the quantity of real GDP demanded.
This change is represented by a movement along the AD curve, not a shift of the curve. A shift of the AD curve would indicate a change in something other than the price level that affects aggregate demand, such as changes in government spending, taxes, or monetary policy.
Since a decrease in the price level leads to an increase in the quantity of real GDP demanded, this is represented by an upward movement along the AD curve.
Therefore, the correct answer is:
upward movement along.
Similar Questions
A decrease in the real money supply caused by an increase in the price level is graphically represented by (A) A movement along the AD curve to the right. (B) A shift of the AD curve to the left. (C) A movement along the AD curve to the left. (D) An increase in the slope of the AD curve. (E) A shift of the AD curve to the right.
A movement along the AD curve is due to:Multiple choice question.a change in aggregate supply.changes in the determinants of aggregate demand.a change in determinants of demand.changes in the price level.
A decrease in the price level will _______________Question 1Answera.shift the aggregate demand curve to the left.b.shift the aggregate demand curve to the right.c.move the economy down along a stationary aggregate demand curve.d.move the economy up along a stationary aggregate demand curve.
A leftward shift in the AD curve accompanied by a leftward shift of the AS curve willA) increase the price level but have an uncertain effect on GDP.B) reduce the price level but have an uncertain effect on GDP.C) increase GDP but have an uncertain effect on the price level.D) reduce GDP but have an uncertain effect on the price level.E) increase both GDP and the price level
In the AD-AS model, which of the following events would most likely shift the Aggregate Demand (AD) curve to the right?A.An increase in consumer confidence. B.A. An increase in taxes. C. B. A decrease in government spending.D.D. An increase in the price level.
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