Over the Horizontal Range of the Economy's AS Curve (Assuming

question 75

Multiple Choice

Over the horizontal range of the economy's AS curve (assuming such a range exists) , a leftward shift of the AD curve will result in

• A)a decrease in both real GDP and prices.
• B)an increase in prices and no change in real GDP.
• C)a decrease in real GDP but no change in prices.
• D)an increase in real GDP and no change in prices.
• E)an increase in both real GDP and prices.

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Definitions:

Transitive

A relation is described as transitive if, whenever it relates some A to B and B to C, it also relates A to C.

Marginal Rate of Substitution

The rate at which a consumer is willing to give up one good in exchange for another good while maintaining the same level of utility or satisfaction.

Perfect Substitutes

Two goods for which consumers are completely indifferent as to which to consume, meaning the consumption of one good can fully replace consumption of the other.

Perfect Complements

Goods that are often consumed together in fixed proportions, such that demand for one increases demand for the other.