Beginning from Long-Run Equilibrium at Point E₁ in Figure 10-18

question 4

Multiple Choice

Beginning from long-run equilibrium at point E₁ in Figure 10-18, the aggregate demand curve shifts to AD₂. The real GDP and price level (CPI) in short-run equilibrium will be

• A)$10 billion and 200.
• B)$10 billion and 150.
• C)$10 billion and 100.
• D)$4 billion and 150.

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Definitions:

Price

The amount of money required to purchase a good or service, determined by factors such as demand, supply, and production cost.

Law Of Demand

The claim that, other things being equal, the quantity demanded of a good falls when the price of the good rises

Price

The monetary value assigned to a product or service, determined by various factors including supply and demand, production cost, and market competition.

Quantity

The amount or number of a material or immaterial good that can be measured or counted.