Consider a Simple Macro Model with a Given Price Level

question 42

Multiple Choice

Consider a simple macro model with a given price level and demand-determined output.An exogenous change in the price level causes a

• A)shift in both the AE and AD curves.
• B)movement along the AE curve and a shift in the AD curve.
• C)movement along both the AE and AD curves.
• D)shift in the AE curve and a movement along the AD curve.
• E)movement along AE but does not affect the AD curve.

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Definitions:

Excise Tax

A levy imposed on the creation, distribution, or use of goods within a nation.

Demand Curve

A graph showing the relationship between the price of a good and the quantity of that good that consumers are willing to buy.

Supply Curve

A graph that shows the relationship between the price of a good and the quantity of the good that producers are willing and able to sell, usually upward sloping, demonstrating that the higher the price, the more producers are willing to supply.