Use the Following to Answer Questions

question 192

Multiple Choice

Use the following to answer questions:
-(Figure: Classical Model of the Price Level) Refer to Figure: Classical Model of the Price Level. If the central bank increases the money supply such that aggregate demand shifts from AD₁ to AD₂, according to this classical model, the SRAS will:

• A) not change, since in the classical model the SRAS and LRAS are both vertical at potential output.
• B) decrease from SRAS₁ to SRAS₂.
• C) increase from SRAS₂ to SRAS₁.
• D) increase from SRAS₁ to SRAS₂.

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Definitions:

Investment

The allocation of resources, usually money, into something expected to generate income or profit in the future.

Durable Goods

Items with a long life span, such as cars and home appliances, which are used over time rather than consumed quickly.

Capital Equipment

Long-lasting tools, machinery, or infrastructure used in the production of goods and services, considered a form of investment in physical capital.

Depreciation

The allocation of an asset's cost over its useful life, reflecting a decrease in the value of tangible and intangible assets over time.