Aggregate Demand (AD)shocks Have a Smaller Effect on Real GDP

question 95

Multiple Choice

Aggregate demand (AD) shocks have a smaller effect on real GDP and a larger effect on the price level

• A)the steeper the AS curve.
• B)on the downward-sloping portion of the AS curve.
• C)the flatter the AS curve.
• D)on the upward-sloping portion of the AS curve.
• E)if the AD curve is flatter.

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Definitions:

Budget Constraint

The limitations on the consumption bundle that a consumer can afford given their income and the prices of goods and services.

Household's Income

The total annual income received by all members of a household, including wages, salaries, benefits, and other sources of income.

Homogeneous Products

Goods that are identical in quality and cannot be distinguished from one another by consumers.

Budget Constraint

A Budget Constraint outlines the combinations of goods and services that a consumer can purchase given their limited income and the prices of these goods and services.