Along the horizontal range of the aggregate supply curve, an increase in the aggregate demand curve will increase:Group of answer choicesboth the price level and real GDP.only real GDP.only the price level.real GDP and reduce the price level.
Question
Along the horizontal range of the aggregate supply curve, an increase in the aggregate demand curve will increase:Group of answer choicesboth the price level and real GDP.only real GDP.only the price level.real GDP and reduce the price level.
Solution
Along the horizontal range of the aggregate supply curve, an increase in the aggregate demand curve will increase only real GDP.
Here's why:
-
The horizontal range of the aggregate supply curve represents a situation where there is a lot of slack in the economy. This could be due to high unemployment or underutilized resources.
-
In this situation, an increase in aggregate demand (i.e., an increase in the total demand for goods and services in the economy) will lead to an increase in real GDP. This is because businesses will respond to the increased demand by ramping up production, which increases the total output of the economy (real GDP).
-
However, because there is a lot of slack in the economy, this increase in production can be achieved without putting upward pressure on prices. Therefore, the price level does not increase.
So, the correct answer is "only real GDP."
Similar Questions
The upward sloping segment of the aggregate supply curve is where:Question 35Select one:a.substantial growth of real GDP can be produced without any increase in the price level (inflation).b.increased price levels result in a corresponding increased real output in the economy.c.price levels (inflation) can rise without increases in real output in the economy.d.is when all available labor resources are being used in the most efficient way possible.e.no growth of real GDP can be produced even with increases in the price levels.
In deriving the aggregate demand curve from the aggregate expenditures model,:Multiple choice question.a change in the price level will have no impact on the aggregate expenditures schedule.a decrease in the price level shifts the aggregate expenditures schedule upward so that the new equilibrium GDP is higher.an increase in the price level shifts the aggregate expenditures schedule upward so that the new equilibrium GDP is lower.an increase in the price level shifts the aggregate expenditures schedule upward so that the new equilibrium GDP is higher.
which of the following is true about the long-run aggregate supply curve?it is vertical at the level of potential gdpit does not shift in response to temporary changes in aggregate demandit shows the relationship between the price level and real gdp when wages and other costs are at an equilibrium level.all the above
Which of the following will result in a rightward shift of the aggregate demand curve?ResponsesAn increase in the income tax rateAn increase in the income tax rateAn increase in exportsAn increase in exportsA decrease in the price levelA decrease in the price levelA decrease in household incomeA decrease in household incomeA decrease in government spending
The aggregate demand curve slopes downward because the relationship between the price level and real GDP is:Multiple choice question.positivedirectinverse
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.