Use the Following Graph to Answer the Following Questions

question 45

Multiple Choice

Use the following graph to answer the following questions.This graph depicts an economy where aggregate demand has decreased,with no change in either short-run aggregate supply (SRAS) or long-run aggregate supply (LRAS) .

-The graph accurately summarizes what happened during the Great Depression,because during that time,the price level ________ and real gross domestic product (GDP) ________.

• A) decreased; decreased
• B) increased; decreased
• C) remained unchanged; remained unchanged
• D) decreased; increased
• E) remained unchanged; decreased

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Definitions:

Substitution Effect

That part of an increase (decrease) in amount consumed that is the result of a good being cheaper (more expensive) in relation to other goods because of a reduction (increase) in price.

Income Effect

The change in consumption resulting from a change in real income, typically due to a price change of goods or services.

Marginal Satisfaction

The change in satisfaction or utility that a consumer experiences from consuming an additional unit of a good or service.

Utility-Maximizing

The economic principle that consumers choose combinations of goods and services to maximize their satisfaction or utility under budget constraints.