Which of the Following Statements About Aggregate Demand Is Correct

question 61

Multiple Choice

Which of the following statements about aggregate demand is correct?

• A) In the short run, shifts in aggregate demand do not affect the overall price level and output
• B) In the short run, shifts in aggregate demand affect the overall price level but do not affect output
• C) In the long run, shifts in aggregate demand cause fluctuations in output
• D) In the long run, shifts in aggregate demand affect the overall price level but do not affect output

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Definitions:

Long-Run Supply

A period sufficient for all inputs to production, including capital, to be varied, allowing for adjustments to changes in demand or technology.

Average Total Cost

The total cost of production divided by the total quantity produced, representing the per-unit cost of production.

Long-Run Equilibrium

A state in which all factors of production and economic variables are in balance, with no external pressures forcing change.

Demand Decreases

A situation where the quantity of a product or service that consumers are willing to buy at a given price drops, often due to changes in preferences, income, or substitutes.