Consider the AD/AS Macro Model

question 67

Multiple Choice

Consider the AD/AS macro model. Suppose there is an increase in aggregate demand and, simultaneously, a decrease in aggregate supply. The result will be a

• A)rise in real GDP and a rise in the price level.
• B)rise in real GDP and a fall in the price level.
• C)an indeterminate change in real GDP and a fall in the price level.
• D)an indeterminate change in real GDP and a rise in the price level.
• E)rise in real GDP but price level changes will be indeterminate.

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Definitions:

Fair-Return

A principle whereby regulated entities are allowed to set prices that cover their costs and provide a reasonable profit.

Price-Discriminating

A pricing strategy where a seller charges different prices for the same product or service to different customers based on various factors.

Elastic

In economics, it describes a situation where the demand or supply for a good changes significantly in response to price changes.

Nondiscriminating

Policies or practices that do not selectively favor or prejudice any particular group or individual.