Exhibit 17-2 Aggregate Demand and Aggregate Supply Curves as Shown

question 47

Multiple Choice

Exhibit 17-2 Aggregate demand and aggregate supply curves As shown in Exhibit 17-2, if people behave according to rational expectations theory, an increase in the aggregate demand curve from AD₁ to AD₂ will cause the economy to move:

• A)directly from E₁ to E₃ and then remain at E₃.
• B)directly from E₁ to E₂ and then remain at E₂.
• C)from E₁ to E₂ initially and then eventually move back to E₁.
• D)from E₁ to E₂ initially and then eventually move to E₃.

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Definitions:

Photosynthesis

A method by which plants and other organisms transform light energy, often from the sun, into chemical energy that can subsequently be utilized to power the organism's functions.

Third Trophic Level

The level in an ecosystem's food chain occupied by secondary consumers, which eat primary consumers.

Herbivore

An animal that feeds on plants or algae. Also called primary consumer.

Ecosystems

Groups of living beings interacting with the inanimate elements of their surroundings as a cohesive system.