When the price level risesrises , A.the equilibrium level of real GDP fallsfalls. B.the aggregate demand...
When the price level
risesrises ,
A.the equilibrium level of real GDP
fallsfalls.
B.the aggregate demand curve
fallsfalls.
C.the
Cplus+Iplus+Gplus+X
line shifts
upwardupward.
D.the
Cplus+Iplus+Gplus+X
line is unchanged.
Homework Answers
Since AD= C+I+G+NX
Since with the increase in the price level, the real disposable income of the consumers decreases, so they demand less goods and services. Hence the aggregate demand increases.
Hence it can be said that when price level rises, the aggregate demand falls.
Hence option B is the correct answer.
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