According to Modern Keynesian Analysis, an Increase in Aggregate Demand

question 226

Multiple Choice

According to modern Keynesian analysis, an increase in aggregate demand leads to a higher price level because the

• A) aggregate demand curve is upward sloping.
• B) short-run aggregate supply curve is upward sloping.
• C) aggregate demand curve is upward horizontal.
• D) short-run aggregate supply curve is vertical.

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Definitions:

Agonist

A chemical or drug that binds to receptors in the brain and causes a reaction or response similar to a naturally occurring substance.

Antagonist

A molecule that binds to a receptor but does not activate it, thereby blocking action of agonist molecules or inhibiting the function of an enzyme.

Curare

A plant extract used by South American indigenous peoples on arrows and darts for hunting, which acts as a muscle relaxant by blocking neurotransmission.

Physostigmine

Physostigmine is a reversible cholinesterase inhibitor used medically to increase acetylcholine levels in the treatment of certain disorders, such as glaucoma and myasthenia gravis.