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:

International Trade

The exchange of goods, services, and capital between countries or territories, influenced by comparative advantage, tariffs, and trade agreements.

Better Off

Refers to a situation where an individual's or group's economic situation or welfare has improved.

Worse Off

A situation in which an individual or group is in a less favorable or disadvantageous position compared to a previous state or to others.

Adam Smith

A Scottish economist and philosopher known as the "father of economics," renowned for his work on the nature and causes of the wealth of nations.