Consider the AD/AS Macro Model

question 51

Multiple Choice

Consider the AD/AS macro model.The main source of increases in material living standards over the long term is the

• A)maintenance of a continuous inflationary gap.
• B)continual avoidance of recessionary gaps.
• C)continuous outward shift of aggregate demand.
• D)continual increase in potential national income.
• E)positive slope of the aggregate supply curve.

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Definitions:

Equilibrium

A state of balance in a market or system where opposing forces cancel each other out and no changes occur over time.

Price Floor

A government- or body-imposed price control or limit on how low a price can be charged for a product.

Surplus

The situation in which the quantity supplied of a product exceeds the quantity demanded at the current price.

Law of Supply

A fundamental principle of economics that states that, all else equal, an increase in price results in an increase in the quantity supplied, and vice versa.