An Assumption That Is Inconsistent with the Aggregate Expenditures Model

question 80

Multiple Choice

An assumption that is inconsistent with the aggregate expenditures model is that:

• A) the short run is the time period of focus.
• B) the price level is fixed.
• C) there is no relationship between aggregate expenditures and real GDP.
• D) the model is most accurate when the economy is at less than full employment (below the natural rate).

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Definitions:

Price Elasticity

Measures how the quantity demanded of a good responds to a change in price, indicating the sensitivity of demand to price changes.

Watches

Timekeeping devices worn on the wrist or carried, designed to show the time and often additional information like date or heart rate.

Per Capita Income

Per capita income is a measure of the average income earned per person in a given area or country, calculated by dividing the area's total income by its total population.

Demand Curve

The curve that illustrates the quantity of a product that consumers are willing and able to buy at each possible price level.