Identify the Correct Statement

question 179

Multiple Choice

Identify the correct statement.

• A) If the price level increases, we feel poorer and buy less.
• B) If the price level increases, we feel richer and buy more.
• C) If domestic prices increase, we substitute imported goods with domestic goods.
• D) An increase in the price of a particular good does not affect the price level in an economy.
• E) A decrease in the price of a particular good is like an increase in income, and therefore, we buy more of the good.

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Definitions:

Aggregate Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price level in an economy.

Aggregate Demand Curve

A graph showing the relationship between the total quantity of goods and services demanded across all sectors of an economy and the price level, all else being equal.

Long-Run Aggregate Supply Curve

A graphical representation that shows the relationship between the overall price level and the quantity of goods and services produced by an economy when all resources are fully employed.

Cyclical Unemployment

The variation in unemployment caused by the ups and downs of economic cycles, including recessions and expansions.