In a Graph That Shows the Aggregate Supply and Aggregate

question 2

Multiple Choice

In a graph that shows the aggregate supply and aggregate demand curves, what are the variables on the axes of the graph?

• A) The price level measured by the implicit price deflator is on the horizontal axis and real GDP is on the vertical axis.
• B) The price level measured by the consumer price index is on the vertical axis and real GDP is on the horizontal axis.
• C) The price level measured by the implicit price deflator is on the vertical axis and real GDP is on the horizontal axis.
• D) The price level measured by the implicit price deflator is on the vertical axis and employment is on the horizontal axis.

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Definitions:

Full Employment

The level of employment where all who are willing and able to work at current wage rates are employed; often considered an indication of an economy's health.

Industrial Economy

An economy characterized by significant industrial activity, often involving manufacturing and the production of goods.

Fine-Tuning

The process of making minor adjustments to monetary and fiscal policy to stabilize the economy, aiming to maintain steady growth and low inflation.

Economic Stability

Economic stability refers to a condition where an economy experiences steady growth, low inflation, and minimal unemployment, thereby reducing uncertainty in economic planning.