The Intersection of the Economy's Aggregate Demand and Long-Run Aggregate

question 96

Multiple Choice

The intersection of the economy's aggregate demand and long-run aggregate supply curves
I. determines its equilibrium real GDP in both the long run and the short run.
II. determines its equilibrium price level in both the long run and the short run.
III. occurs at the economy's potential output.

• A) I, II, and III
• B) I and III only
• C) II and III only
• D) III only

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Definitions:

Carbon Tax

A tax imposed on the carbon content of fuels to mitigate environmental impacts of carbon dioxide emissions.

Carbon Dioxide Emissions

Carbon dioxide emissions are the release of CO2 into the atmosphere, primarily from burning fossil fuels, which contribute to global warming and climate change.

Allocative Efficiency

A state of resource allocation where it is impossible to make any one individual better off without making someone else worse off, ensuring that resources are used for producing the goods and services most desired by society.

Willingness to Pay

The maximum amount an individual is ready to spend on a good or service, reflecting the value the consumer places on it.