If There Is a Fall in National Output and a Rise

question 45

Multiple Choice

If there is a fall in national output and a rise in inflation, this implies that the _____.

• A) aggregate demand curve has shifted to the right
• B) aggregate demand curve has shifted to the left
• C) aggregate supply curve has shifted to the right
• D) aggregate supply curve has shifted to the left

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Definitions:

Absolute Purchasing Power Parity

Absolute Purchasing Power Parity is an economic theory that compares different countries' currencies through a "basket of goods" approach, suggesting that exchange rates should adjust to equalize the price of identical goods in different countries.

Exchange Rate

How one currency's value is represented using another currency's value.

Indian Rupees

The official currency of India, abbreviated as INR, used as a medium of exchange within the country.

Absolute Purchasing Power Parity

A theory that suggests that in the absence of transaction costs and other barriers, the purchasing power of a currency is the same domestically as it is abroad.