The Model of Aggregate Demand and Aggregate Supply

question 12

Multiple Choice

The model of aggregate demand and aggregate supply

• A)is different from the model of supply and demand for a particular market,in that we cannot focus on the substitution of resources between markets to explain aggregate relationships.
• B)is different from the model of supply and demand for a particular market,in that we have to separate real and nominal variables in the aggregate model.
• C)is a straightforward extension of the model of supply and demand for a particular market,in which substitution of resources between markets is highlighted.
• D)is a straightforward extension of the model of supply and demand for a particular market,in which the interaction between real and nominal variables is highlighted.

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Definitions:

Equilibrium Price

The price at which the supply of an item matches its demand, resulting in market stability.

Market

A venue or mechanism through which buyers and sellers interact to trade goods, services, or financial instruments.

Tax

A compulsory financial charge or levy imposed by a government on individuals or entities to fund public expenditures.

Tax Per Unit

A fixed amount of tax imposed on each unit of a product or service sold.