The AS Curve Slopes Upward Because

question 1

Multiple Choice

The AS curve slopes upward because:

• A) all firms will increase their prices in response to an increase in aggregate demand, but some will increase their output and others will decrease their output.
• B) all firms will increase their prices, but not their output in response to an increase in aggregate demand.
• C) some firms will increase their prices and their output in response to an increase in aggregate demand.
• D) all firms will increase their prices and their output in response to an increase in aggregate demand.

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Definitions:

GDP Deflator

A measure of the price level of all new, domestically produced, final goods and services in an economy, used to adjust nominal GDP to real GDP.

Substitution Bias

A distortion in the Consumer Price Index due to changes in consumer purchase behavior or product substitutions.

Introduction of New Goods

The process through which new products are developed and brought to the market, influencing consumer choice and potentially market structures.

CPI Construction

The method of creating the Consumer Price Index, which measures changes in the price level of a market basket of consumer goods and services purchased by households.