What Impact Did the Change in Housing Prices During 2002

question 31

Multiple Choice

What impact did the change in housing prices during 2002 to 2005 have within the framework of the AD/AS model?

• A) Declining housing prices reduced aggregate demand shifting AD leftward.
• B) Rising housing prices increased aggregate demand shifting AD rightward.
• C) Rising housing prices led to increased construction shifting LRAS leftward.
• D) Declining housing prices caused SRAS to shift leftward.

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Definitions:

Perfect Competitor

A hypothetical market structure in which no individual firm has any market power, allowing for an ideal level of competition where prices reflect actual costs.

Imperfect Competitor

A market participant who does not meet the conditions of perfect competition, often having some control over the price of its product or service.

MRP Schedule

A table showing the marginal revenue product (MRP) which is the additional revenue generated from using one more unit of a resource.

Perfect Competitor

A theoretical market structure where numerous small firms compete against each other and goods are perfect substitutes, leading to the inability of firms to influence prices.