How Does the Aggregate Demand and Aggregate Supply Model Reflect

question 217

Multiple Choice

How does the aggregate demand and aggregate supply model reflect a rise in wage rates?

• A) The short-run aggregate-supply curve shifts to the right.
• B) The short-run aggregate-supply curve shifts to the left.
• C) The aggregate-demand curve shifts to the right.
• D) The aggregate-demand curve shifts to the left.

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Definitions:

Perfect Competition

An industry structure in which there are many firms, each being small relative to the industry and producing virtually identical products, and in which no firm is large enough to have any control over prices.

Demand Curve

A graphical representation of the relationship between the price of a good or service and the quantity demanded by consumers.

Marginal Revenue Curve

A graph showing the change in total revenue for a business that results from selling one additional unit of a product or service.

Perfectly Competitive Industry

A theoretical market structure where there are many buyers and sellers, homogeneous products, no barriers to entry and exit, and perfect information, leading to an efficient allocation of resources.