If the Aggregate Supply Curve Has Its Normal Shape, Deficit

question 5

Multiple Choice

If the aggregate supply curve has its normal shape, deficit spending will increase

• A)both GDP and the price level at about the same rate.
• B)the price level before it increases real GDP.
• C)the price level but decrease real GDP.
• D)real GDP before it increases the price level.

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Definitions:

Fixed Cost

A cost that does not change with an increase or decrease in the amount of goods or services produced or sold.

Marginal Cost

The escalation in the entire cost linked to the output of an additional unit.

Average Cost

The cost per unit is determined by dividing the overall production cost by the total units produced.

Average Total Cost

The total cost of production (fixed and variable costs combined) divided by the quantity of output produced.