Exhibit 14-8 Aggregate Demand and Supply

question 65

Multiple Choice

Exhibit 14-8 Aggregate demand and supply

-In Exhibit 14-8,if aggregate demand shifts from AD₂ to AD₁,real GDP will:

• A) fall from $4.0 to $3.0, and the price level will fall from 120 to 100.
• B) fall from $4.0 to $3.0, and the price level will not change.
• C) fall from $7.0 to $4.0, and the price level will not change.
• D) not change, and the price level will not change.
• E) fall from $4.0 to $3.0, and the price level will fall from 170 to 100.

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Definitions:

Maximum Utility

The highest level of satisfaction or benefit that a consumer can obtain from the consumption of goods and services within the constraints of their income and prices.

Consumer Income

The total amount of money earned by individuals or households that can be used for saving, spending, or investing.

MU y/ Pᵧ

MU y/ Pᵧ represents the marginal utility of good "y" divided by its price, a concept in economics used to analyze consumer choice, indicating the additional satisfaction per unit of currency spent on that good.

Maximize Utility

The economic principle of selecting the option that yields the highest satisfaction or benefit.