Suppose the Economy Is on the Intermediate Range of the Aggregate

question 78

Multiple Choice

Suppose the economy is on the intermediate range of the aggregate supply curve. Which of the following would reduce both real GDP and the price level?

• A) a decrease in aggregate supply
• B) an increase in aggregate supply
• C) a decrease in aggregate demand
• D) an increase in aggregate demand

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Definitions:

National Saving

The total of private savings and government savings, essentially the portion of national income that is not consumed or spent by government.

Open-Economy Macroeconomic Model

A framework used to evaluate the interactions between a country’s macroeconomy and the global economy, taking into account trade, foreign investment, and exchange rates.

Real Interest Rate

The interest rate adjusted for inflation, reflecting the real cost of funds to the borrower and the real yield to the lender.

Real Exchange Rate

A measure that adjusts the nominal exchange rate between two currencies to reflect their purchasing power.