In the Classical Model, a Change in Aggregate Demand

question 314

Multiple Choice

In the classical model, a change in aggregate demand

• A) causes a change in long-run real GDP but not in the price level.
• B) causes a change in the price level but not in the long-run real GDP.
• C) causes changes in both the long-run real GDP and in the price level.
• D) has no effect on either real GDP or the price level.

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Definitions:

Pension Plan

A retirement plan that requires an employer to make contributions into a pool of funds set aside for a worker's future benefit.

Annual Pension Benefit

The amount of money an individual receives annually from their retirement plan after retiring.

Variable Component

A cost or expense that changes in proportion to changes in a business’s activity level.

Payroll System

A system used by companies to organize, calculate, and process payments to employees for their services.