The Aggregate Supply and Aggregate Demand Model Below Provides Insights

question 63

Multiple Choice

The aggregate supply and aggregate demand model below provides insights into the causes of the Great Depression of the 1930s. Indicate points 1 and 2 and whether price level increases or decreases when aggregate demand changes from AD₁ to AD₂.

• A) Point 1 is the booming of 1920s, point 2 is the depression of 1930s; price level decreases
• B) Point 1 is the booming of 1920s, point 2 is the depression of 1930s; price level increases
• C) Point 1 is the depression of 1930s, point 2 is the booming of 1920s; price level decreases
• D) Point 1 is the depression of 1930s, point 2 is the booming of 1920s; price level increases

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Definitions:

Correcting Entries

Journal entries made to amend previously recorded transactions that were entered incorrectly.

Adjusting Entries

Journal entries made in preparation for financial statements to allocate income and expenses to the period in which they actually occurred.

Balance Sheet Account

An account found on the balance sheet which can include assets, liabilities, and equity accounts.

Income Statement Account

An account found in the income statement that records revenues, expenses, gains, and losses.