In the Classical Model

question 300

Multiple Choice

In the classical model

• A) a decrease in aggregate demand will lead to a decrease in the price level and a decrease in real GDP.
• B) changes in aggregate supply leave real GDP unchanged.
• C) a decrease in aggregate demand will lead to an increase in the price level and a decrease in real GDP.
• D) changes in aggregate demand affect only the price level, not real GDP.

---

Definitions:

Employment Levels

The number or percentage of people within a population who are currently employed, indicating the health of an economy.

International Gold Standard

A monetary system in which the standard economic unit of account is based on a fixed quantity of gold, allowing for stable exchange rates among countries.

Gold Flow

The movement of gold between countries, often used as a form of international payment or to stabilize currencies under the gold standard.

Price and Incomes

Policies or measures aimed at controlling the growth of prices and incomes to curb inflation without affecting employment.