Figure 119 Alt Text for Figure 11

question 280

Multiple Choice

Figure 11.9 Alt text for Figure 11.9: In figure 11.9, a static AD-AS model.
Long description for Figure 11.9: The x-axis is labelled, real GDP (trillions of 2007 dollars) and the y-axis is labelled, price level (CPI) .5 lines are shown; AD1, AD2, AD3, LRAS, SRAS.Line AD1 begins in the top left corner and slopes down to the end of the x-axis.Line AD2 follows the same slope but is plotted to the left.Similarly, line AD3 is plotted to the left of line AD2.Line SRAS begins close to the vertex and slopes up to the top right corner.Line LRAS is perpendicular to the x-axis, and passes through points D, B, and E.Lines AD3 and SRAS intersect at point A.Lines AD2, LRAS, and SRAS intersect at point B.Lines AD1 and SRAS intersect at point C.Lines AD1 and LRAS intersect at point D.Lines AD3 and LRAS intersect at point E.
-Refer to Figure 11.9.Suppose the Bank of Canada lowers its target for the overnight interest rate.Using the static AD-AS model in the figure above, this situation would be depicted as a movement from

• A)A to B.
• B)B to A.
• C)C to B.
• D)E to A.
• E)C to D.

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Definitions:

Substitute Products

Products for which changes in demand are negatively related; that is, a percentage increase in the quantity demanded for product A results in a percentage decrease in the quantity demanded for product B.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, often influencing pricing strategies.

Demand

The quantity of a good or service that consumers are willing and able to purchase at a given price over a specified period.

Pricing Strategies

Approaches businesses use to set the prices of their products or services, taking into account costs, competition, customer demand, and market conditions.