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

question 9

Multiple Choice

The derivation of the aggregate demand curve (AD) in the open economy builds upon the Fact that, as the price level rises, other things equal,

• A) the LM curve shifts to the left but the IS and BP curves do not shift.
• B) the LM and BP curves shift to the left but the IS curve does not shift.
• C) the IS and LM curves shift to the left but the BP curve does not shift.
• D) the IS, LM, and BP curves all shift to the left.

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Definitions:

Prepaid Rent

An advance payment for rent that is recorded as an asset on the balance sheet until it is consumed.

Net Income

The total earnings of a company after subtracting all expenses, including taxes and operating costs, from its total revenues.

Revenue Accounts

Accounts recording the income a company generates from its operations, not related to its investments or other sources.