According to the New Classical Approach to the Aggregate Supply

question 25

Multiple Choice

According to the new classical approach to the aggregate supply curve,the aggregate supply curve slopes upward because

• A) increases in the price level result in lower real money balances.
• B) higher current output results in higher desired investment.
• C) higher prices result in higher levels of spending as consumers attempt to stay ahead of inflation.
• D) businesses have difficulty in distinguishing relative price increases from general price increases.

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Definitions:

Output Effect

The impact on economic output and productivity resulting from a change in the level of economic activity.

Wage Rate

The amount of money paid to workers per unit of time, often hourly or monthly, for their labor.

MRP

Marginal Revenue Product, the additional revenue generated from using one more unit of a factor of production.

Rent

Payment made periodically by a tenant to a landlord in exchange for the use of land, a building, or another property.