If an Increase in the Price of Bicycles Leads to an Increase

question 19

Multiple Choice

If an increase in the price of bicycles leads to an increase in the demand for bus transportation,the bicycles and bus rides must be

• A)Substitutes
• B)Complements
• C)Normal goods
• D)Inferior goods
• E)Standardized products

---

Definitions:

Potential Output

The level of productivity an economy can achieve with full employment and resources utilization, without causing inflation.

Natural Rate

The Natural Rate often refers to the natural rate of unemployment, where the unemployment rate is at a level expected in a fully efficient market without cyclical or short-term unemployment.

Long-Run Aggregate Supply Curve

This curve shows the relationship between the overall price level and the total output produced in an economy when wages and resource prices fully adjust to changes, reflecting an economy’s maximum sustainable output level.

Potential Output

A measure of the highest level of economic output an economy can sustain over a period without increasing inflation; synonymous with potential GDP.