Asked by Rachel Schultz on Jun 20, 2024
Verified
Which of the following is an effect of an increase in the price level in an economy?
A) The real value of dollar-denominated assets will increase.
B) The aggregate expenditure line will shift upward.
C) The equilibrium real gross domestic product will decrease.
D) There will be downward movement along a particular aggregate demand curve.
E) The aggregate demand curve will shift rightward.
Aggregate Expenditure Line
A graphical representation of the total spending in an economy, including consumption, investment, government, and net exports, at various levels of income.
Price Level
The average of current prices across the entire spectrum of goods and services produced in the economy, which can affect purchasing power and inflation.
- Identify the impact of price level fluctuations on consumption patterns, exporting behaviors, and the total demand curve.
- Acquire knowledge on the significance of price level in shaping the overall demand and spending in an economy.
Verified Answer
CC
Christie CzajkaJun 25, 2024
Final Answer :
C
Explanation :
An increase in the price level in an economy will lead to a decrease in the purchasing power of consumers and a decrease in consumer demand. This will result in a decrease in the equilibrium Real Gross Domestic Product (GDP) as the quantity of goods and services demanded by consumers will decrease.
Learning Objectives
- Identify the impact of price level fluctuations on consumption patterns, exporting behaviors, and the total demand curve.
- Acquire knowledge on the significance of price level in shaping the overall demand and spending in an economy.
Related questions
If the Price Level in an Economy Increases,other Things Constant,consumption ...
An Increase in the Price Level in an Economy Will ...
The Aggregate Demand Curve of an Economy Illustrates the Relationship ...
If Speculators Bid Up the Value of the Dollar in ...
If Aggregate Demand Increases And,as a Result,the Price Level Increases ...