An Increase in Aggregate Demand When the Economy Is Operating

question 226

Multiple Choice

An increase in aggregate demand when the economy is operating at high levels of output is likely to result in

• A) a large increase in both output and the overall price level.
• B) an increase in the overall price level but little or no increase in output.
• C) an increase in output but little or no increase in the overall price level.
• D) little or no increase in either output or the overall price level.

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Definitions:

Total Product

Total product is the overall quantity of output that a firm produces, usually within a specified period, based on variable inputs.

Marginal Product

Marginal product refers to the additional output that is produced by employing one more unit of a particular input, holding other inputs constant.

Average Product

The output produced per unit of input, calculated by dividing total product by the quantity of input.

Marginal Product

Represents the additional output that can be produced by adding one more unit of a specific input, keeping all other inputs constant.