Asked by Benoit Chenou on Jul 01, 2024
Verified
When looking at a graph of aggregate demand, which of the following is correct?
A) There are nominal variables on both the vertical and the horizontal axes.
B) There are real variables on both the vertical and horizontal axes.
C) The variable on the vertical axis is nominal; the variable on the horizontal axis is real.
D) The variable on the vertical axis is real; the variable on the horizontal axis is nominal.
Aggregate Demand
The aggregate need for all products and services across an economy at different pricing points, during a defined timeframe.
Nominal Variables
Economic variables measured in monetary terms without adjustment for inflation, reflecting their value in current prices.
Real Variables
Variables measured in physical units.
- Explain the components that constitute aggregate demand within an economy.
Verified Answer
ZK
Zybrea KnightJul 03, 2024
Final Answer :
C
Explanation :
In a graph of aggregate demand, the vertical axis typically represents the price level, which is a nominal variable, and the horizontal axis represents real GDP or output, which is a real variable. This setup allows for the analysis of the relationship between the overall price level in the economy and the total output of goods and services, adjusted for inflation.
Learning Objectives
- Explain the components that constitute aggregate demand within an economy.