In the Aggregate Demand Model, Changes in GDP in the Short

question 1

Multiple Choice

In the aggregate demand model, changes in GDP in the short run can be caused by

• A) shifts in the aggregate demand schedule.
• B) shocks to the price level.
• C) a change in potential GDP.
• D) all of the above.
• E) a and b.

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Definitions:

Pre-Tax Book Income

Income of a business before the deduction of tax expenses as reported in the financial statements, not necessarily reflective of taxable income.

Depreciation Expense

An accounting method that allocates the cost of a tangible asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.

Temporary Difference

A discrepancy between the tax basis of an asset or liability and its carrying amount on the balance sheet, which will eventually settle and affect taxable income.

Book Income

A company's income as reported in its financial statements, representing the difference between revenues and expenses.