Given Aggregate Demand, a Decrease in Aggregate Supply Creates

question 89

Multiple Choice

Given aggregate demand, a decrease in aggregate supply creates:

• A) a higher price level and a higher GDP level.
• B) a lower price level and a higher GDP level.
• C) cost-push inflation.
• D) demand-pull inflation.

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Definitions:

Regressive

Pertaining to a tax system in which the tax rate decreases as the taxable amount increases, burdening proportionally more on lower-income earners.

Proportional

Corresponding in size, degree, or intensity; having a constant relation in degree or number between the parts.

Sales Taxes

Taxes imposed by governmental entities on sales of goods and services, typically collected at the point of sale from the consumer.

Regressive

Referring to a tax system where the tax rate decreases as the taxable amount increases, placing a higher relative burden on lower-income earners.