How Does a Rise in Real Income Affect Aggregate Demand

question 102

Multiple Choice

How does a rise in real income affect aggregate demand?

• A) Y ↑ implies Yd ↑ implies Im ↑ implies CA ↓ implies AD ↓, but Y ↑ implies Yd ↑ implies C ↑ implies AD ↑ by more.
• B) Y ↑ implies Yd ↑ implies Im ↓ implies CA ↓ implies AD ↓, but Y ↑ implies Yd ↑ implies C ↑ implies AD ↑ by more.
• C) Y ↑ implies Yd ↑ implies Im ↑ implies CA ↑ implies AD ↑, and Y ↑ implies Yd ↑ implies C ↑ implies AD ↑.
• D) Y ↑ implies Yd ↑ implies Im ↑ implies CA ↓ implies AD ↓, but Y ↑ implies Yd ↑ implies C ↑ implies AD ↑ by less.
• E) Y ↑ implies Yd ↑ implies Im ↓ implies CA ↓ implies AD ↓, but Y ↑ implies Yd ↑ implies C ↑ implies AD ↑ by less.

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Definitions:

Firm

An enterprise like a corporation, partnership, or sole proprietorship involved in commercial, industrial, or professional operations.

AFC

stands for Average Fixed Cost, which is the fixed cost per unit of output, calculated by dividing total fixed costs by the quantity of output produced.

Output Rises

Refers to an increase in the production level of goods and services over a certain period.

Output Rises

An increase in the production of goods and services within an economy.