Exhibit 17-2 Aggregate Demand and Aggregate Supply Curves

question 44

Multiple Choice

Exhibit 17-2 Aggregate demand and aggregate supply curves

As shown in Exhibit 17-2, if people behave according to adaptive expectations theory, an increase in the aggregate demand curve from AD₁ to AD₂ will cause:

• A) labor to adjust nominal wages immediately.
• B) the aggregate supply curve to shift from SRAS₁ to SRAS₂
• C) the price level to eventually fall from 110 to 100.
• D) real GDP to rise from $6 trillion to $6.5 trillion permanently.

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Definitions:

Zoning Ordinance

Regulations set by local governments determining how land within their jurisdiction can be used, affecting the development and use of properties.

Occupancy

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Apartments

Residential units within a building or complex, typically available for rent, that consists of living space including bedrooms, a kitchen, and a bathroom.

Statute of Frauds

A legal principle that requires certain contracts to be in writing and signed by the parties involved, to be enforceable.