An Increase in Aggregate Demand Will Have a Smaller Long-Run

question 7

Multiple Choice

An increase in aggregate demand will have a smaller long-run effect on real GDP if the:

• A)aggregate demand curve is flat.
• B)short-run aggregate supply curve is horizontal.
• C)economy is well below potential output.
• D)economy is already at potential output.
• E)aggregate demand curve is fairly steep.

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Definitions:

Opportunity Cost

The cost of forfeiting the next best alternative when making a decision to pursue a particular action.

Spain

A country located on the Iberian Peninsula in southwestern Europe, known for its rich history, cultural diversity, and significant contributions to art, literature, and global exploration.

TVs

Short for televisions, electronic devices designed for receiving and displaying video and audio signals, providing entertainment, information, and often educational content to viewers.

Comparative Advantage

The principle that countries or entities benefit by producing goods and services for which they have lower opportunity costs than others, allowing for trade efficiencies.