In Order for an Increase in Aggregate Demand to Raise

question 2

Multiple Choice

In order for an increase in aggregate demand to raise Real GDP and the price level,the aggregate supply curve must be ____________________.If an increase in aggregate demand raises the price level but leaves Real GDP unchanged,the aggregate supply curve must be _____________________.

• A) upward-sloping; vertical
• B) upward-sloping; horizontal
• C) downward sloping; vertical
• D) vertical; upward-sloping
• E) vertical; downward-sloping

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Definitions:

Average-fixed-cost Curve

A graphical representation showing how the average fixed cost of production decreases as the quantity of output increases.

Implicit Costs

The opportunity costs of using resources owned by the business for its operations instead of allocating them to their best alternative use.

Interest Rate

The expense associated with taking out a loan or the earnings from investments, usually shown as a percent of the total amount invested or borrowed.

Specialization

The process of focusing effort and resources on a limited number of activities to gain efficiency or expertise.