The AD-AS (aggregate demand and aggregate supply) model is a useful simplification of the macroeconomy.
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The horizontal axis of a diagram of the AD and AS curves measures:
A) An economy’s aggregate output
B) An economy’s aggregate price level
C) The price of one particular “representative” good produced in the economy
D) The amount of one particular “representative” good produced in the economy -
The vertical axis of a diagram of the AD and AS curves measures:
A) An economy’s aggregate output
B) An economy’s aggregate price level
C) The price of one particular “representative” good produced in the economy
D) The amount of one particular “representative” good produced in the economy -
Which of the following are reasons why the aggregate demand curve slopes downward? Choose all that apply.
A) As the aggregate price level rises, households’ real wealth increases.
B) As the aggregate price level rises, money demand falls, interest rates fall, and investment increases.
C) As the aggregate price level rises, households’ real wealth decreases. -
Which of the following are reasons why the short-run aggregate supply curve slopes upward? Choose all that apply.
A) As the aggregate price level rises, firms expand their production because they can sell their output at a higher unit profit.
B) As the aggregate price level rises, firms find it more profitable to hire workers at any given wage.
C) As the aggregate price level rises, firms decrease their investment because it is more expensive to purchase capital.