The Derivation of the Aggregate Demand Curve (AD) in the Closed

question 1

Multiple Choice

The derivation of the aggregate demand curve (AD) in the closed economy builds upon the fact that, as the domestic price level rises, other things equal, the equilibrium level of income in the IS/LM diagram __________.

• A) rises
• B) is unchanged
• C) falls
• D) rises, is unchanged, or falls - cannot be determined without more information

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Definitions:

Progressive Tax

A tax system where the tax rate increases as the taxable amount or income rises, meaning higher earners pay a larger percentage of their income in taxes than lower earners.

Progressive Tax

A tax system where the tax rate increases as the taxable amount increases, meaning higher income individuals pay a larger percentage of their income in taxes compared to lower-income individuals.

Tax Rate

The percentage at which an individual or corporation is taxed.

Income Increases

Refers to a rise in the amount of money received by a person or entity, typically from work, business, or investments.