The Aggregate Expenditures Model and the Aggregate Demand Curve Can

question 262

Multiple Choice

The aggregate expenditures model and the aggregate demand curve can be reconciled because, other things equal, in the aggregate expenditures model,

• A) changes in the price level have no effect on the equilibrium level of GDP.
• B) an increase in the price level increases the real value of wealth.
• C) the level of aggregate expenditures and therefore the level of real GDP vary inversely with the price level.
• D) the level of aggregate expenditures and therefore the level of real GDP vary directly with the price level.

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Definitions:

Operating Cycle

The time period between the acquisition of inventory and the collection of cash from accounts receivable.

Cash Cycle

The amount of time required for a company to turn its inventory and various assets into cash through sales revenue.

Restrictive Policy

A policy implemented by a company or government to limit or control certain activities, often to ensure financial stability or compliance with regulations.

Flexible Policy

A strategy or guideline that is adaptable to changes and allows for discretionary decisions based on circumstances.