Other Things Being Equal, Along the Aggregate Demand Curve, a Higher

question 96

Multiple Choice

Other things being equal, along the aggregate demand curve, a higher price level is associated with

• A)a decrease in the quantity of nominal GDP demanded.
• B)a decrease in the quantity of real GDP demanded.
• C)higher income levels.
• D)an increase in the quantity of real GDP demanded.

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Definitions:

Perfect Substitutes

Goods or services that can be used in exactly the same way and to the same extent, where one can completely replace the other in consumption.

Income Effect

The alteration in income for a person or the economy and the resulting influence on the demand for a certain good or service.

Substitution Effect

The economic principle indicating how consumers react to a change in price by substituting a more expensive item with a cheaper alternative.

Price

The total money demanded to secure a good or service.