If the Aggregate Supply Curve Has Its Normal Shape, Deficit

question 5

Multiple Choice

If the aggregate supply curve has its normal shape, deficit spending will increase

• A)both GDP and the price level at about the same rate.
• B)the price level before it increases real GDP.
• C)the price level but decrease real GDP.
• D)real GDP before it increases the price level.

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Definitions:

Utility Function

A mathematical representation of how different bundles of goods are ranked according to their utility or satisfaction provided to the consumer.

Equivalent Variation

A measure in economics that indicates the amount of money a consumer would need to reach their initial utility level after a price change.

Price Change

A variation in the cost of goods or services over time, which can be an increase or decrease.

Income

The total amount of money earned by an individual or entity from various sources, including work, investments, or benefits, over a specified period.