Exhibit 14-2 Aggregate Demand and Supply

question 109

Multiple Choice

Exhibit 14-2 Aggregate demand and supply

-In Exhibit 14-2,if aggregate demand shifts from AD₃ to AD₄,real GDP will:

• A)rise from $7 to $8 and the price level will rise from 120 to 140.
• B)rise from $7 to $8 and the price level will rise from 120 to 170.
• C)rise from $7 to $8 and the price level will rise from 100 to 140.
• D)not change and the price level will rise from 120 to 140.
• E)rise from $4 to $8 and the price level will rise from 120 to 140.

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Definitions:

Semi-annually

Occurring twice a year, or every six months.

Compounded

The method of calculating interest where the accumulated interest is added back to the principal sum, so that interest in the next period is then earned on the principal plus previously accumulated interest.

Principal

The original amount of money invested or loaned, before interest.

Compounded

The process of calculating interest on both the initial principal and the accumulated interest from previous periods.