What Impact Did the Change in Housing Prices During 2002

question 31

Multiple Choice

What impact did the change in housing prices during 2002 to 2005 have within the framework of the AD/AS model?

• A) Declining housing prices reduced aggregate demand shifting AD leftward.
• B) Rising housing prices increased aggregate demand shifting AD rightward.
• C) Rising housing prices led to increased construction shifting LRAS leftward.
• D) Declining housing prices caused SRAS to shift leftward.

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Definitions:

Demand Curve

A graph showing the relationship between the price of a good and the quantity of that good consumers are willing and able to purchase at various prices.

Profit

The financial gain made by a business when revenue exceeds expenses.

Relationship

A connection, association, or involvement between two or more parties, often referring to interpersonal or business contexts.

Price Elasticity

The measure of how sensitive the demand for a product or service is to changes in its price.