An Initial Increase in Aggregate Demand That Is NOT Followed

question 53

Multiple Choice

An initial increase in aggregate demand that is NOT followed by an increase in the quantity of money results in a long- run equilibrium with

• A)a higher price level and an increased level of real GDP.
• B)a higher price level but the same real GDP.
• C)the same price level and a lower level of real GDP.
• D)None of the above answers is correct.

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Definitions:

Utility

A measure of the satisfaction or happiness that a person derives from consuming goods and services.

Marginal Rate

Refers to the rate at which one quantity changes with respect to a change in another, commonly used in economics to describe the marginal rate of substitution or marginal rate of transformation.

Indifference Map

A collection of indifference curves that graphically represent a consumer's preferences across different combinations of two goods.

Space

The infinite extension of the three-dimensional region in which all matter exists.