Which of the following helps explain why real GDP is inversely related to the price level within the framework of the AD-AS model?

a. As prices fall, domestic consumers have an incentive to buy more of the cheaper goods and services.
b. As prices fall, the monetary authorities will have to increase the money supply, which will lead to an increase in the quantity of goods and services purchased.
c. As prices fall, the government will have to reduce taxes, which will lead to an increase in the quantity of goods and services purchased.
d. As prices fall, the wealth of people holding the fixed quantity of money increases, causing them to expand their purchases of goods and services.


d

Economics

You might also like to view...

Suppose the United States eliminates high tariffs on German bicycles. As a result, we would expect

A. the price of German bicycles to increase in the United States. B. employment to decrease in the U.S. bicycle industry. C. employment to decrease in the German bicycle industry. D. profits to rise in the U.S. bicycle industry.

Economics

Which of the following are NOT included among Gordon's criticisms of Friedman's fooling model?

A) Workers buy many goods on a weekly basis and thus could discover quite quickly that prices had risen. B) Workers could discover movements in the aggregate price level fairly easily. C) The model relied on a non-market-clearing explanation of the labor market. D) Workers would predict higher prices if policies that led to higher prices in the past were used again.

Economics

Explain the difference between GDP and GNP

What will be an ideal response?

Economics

The two basic reasons why a monopoly exists are barriers to entry and cost advantages

a. True b. False Indicate whether the statement is true or false

Economics