When potential GDP increases, _______
A. aggregate demand increases
B. aggregate supply increases
C. both aggregate demand and aggregate supply increase
D. the price level rises
B As Figure 19.2 in the text shows, an increase in potential GDP increases aggregate supply.
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Mutually beneficial trade is impossible when different persons have different preferences about goods and services.
Answer the following statement true (T) or false (F)
Which of the following is not a component of aggregate demand?
a. Consumption b. Investment spending c. Government spending d. Real interest rate
The effect of a change in the value of the dollar in the foreign exchange market due to a change in the price level helps explain the slope of aggregate demand, but does not shift it. The effects of a change in the value of the dollar in the foreign exchange market due to speculation is shown by shifting the aggregate demand curve
a. True b. False Indicate whether the statement is true or false
If not all prices adjust instantly to changing economic circumstances, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to ________ the quantity of goods and services they produce.
a) increase substantially b) increase slightly c) reduce d) make no changes to