Consider the AD/AS Model After Factor Prices Have Fully Adjusted

question 83

Multiple Choice

Consider the AD/AS model after factor prices have fully adjusted to output gaps.An increase in the level of potential output,with aggregate demand constant,will

• A)affect only the price level.
• B)decrease real GDP and the price level.
• C)affect only the level of real GDP.
• D)increase real GDP and lower the price level.
• E)decrease real GDP and raise the price level.

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Definitions:

Standard Deviation

A statistical measure that quantifies the amount of variation or dispersion of a set of numeric values.

Risky Asset

A financial instrument that has a significant degree of risk associated with it, potentially leading to loss or gain.

Negatively Correlated

Describes two variables that move in opposite directions; as one increases, the other tends to decrease.

Variance

A measure of the dispersion of a set of data points around their mean value, indicating how spread out the data points are.