Exhibit 17-3 Aggregate Demand and Aggregate Supply Curves

question 2

Multiple Choice

Exhibit 17-3 Aggregate demand and aggregate supply curves

As shown in Exhibit 17-3, if people behave according to adaptive expectations theory, an increase in the aggregate demand curve from AD₁ to AD₂ will cause the economy to move:

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

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Definitions:

Imports

Goods and services brought into a country from abroad for sale.

Gross Domestic Product

Gross Domestic Product (GDP) is the total monetary value of all goods and services produced within a country's borders in a specific time period, a primary indicator of economic health.

Sale Price

The actual price at which an item or service is sold to the consumer, often reduced from its original or list price.

New Furniture

Recently manufactured items intended to support various human activities such as seating, eating, and sleeping.