The Interest Rate Effect of a Change in the Aggregate

question 107

Multiple Choice

The interest rate effect of a change in the aggregate price level causes the:

• A) long-run aggregate supply curve to be vertical.
• B) aggregate demand curve to be negatively sloped.
• C) short-run aggregate supply curve to be positively sloped.
• D) aggregate demand curve to be positively sloped.

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Definitions:

Fixed Costs

Costs that remain constant regardless of the amount of goods produced or sold, like wages or lease payments.

Marginal Costs

The extra expense incurred from making one more unit of a product or service.

Average Cost

The total cost of production divided by the number of goods produced, showing the cost of producing each unit.

Marginal Cost

The cost incurred to produce one additional unit of a product or service.