When an Increase in Aggregate Demand Exceeds the Increase in Aggregate

question 49

Multiple Choice

When an increase in aggregate demand exceeds the increase in aggregate supply,

• A) the price level falls while real GDP increases.
• B) real GDP decreases while nominal GDP increases.
• C) nominal GDP decreases and real GDP decreases.
• D) the economy will experience inflation as the price level rises.

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Definitions:

Medicare and Medicaid

Medicare and Medicaid are U.S. government programs that provide medical and health-related services to specific groups of people, including the elderly, disabled, and individuals with low income.

Freedom to Farm Act

A U.S. law enacted in 1996 that aimed to phase out various agricultural subsidies and reduce federal regulation of farming, thereby allowing farmers more freedom in making planting decisions.

Price-Support Payments

Government subsidies provided to farmers or producers to maintain the market price of an agricultural product above its competitive equilibrium level.

Family Farm

A farm owned and operated by a family, typically passed down through generations, as opposed to corporate farms owned by companies.