Question 26 2 pt According to classical economics: real GDP is determined by agg

Question

Question 26 2 pt According to classical economics: real GDP is determined by aggregate supply, while the equilibrium price level is determined by aggregate demand. o O both real GDP and price level are determined by aggregate demand O both real GDP and price level are determined by aggregate supply. o real GDP is determined by aggregate demand, white the equilibrium price level is determined by aggregate supply @ price level cannot be changed as prices and wages are perfectly rigid. 2 pts Question 27

Explanation / Answer

26) a) In classical economics real GDP is determined by aggregate supply and price level is determined by demand.

In a classical economy, supply creates its own demand, and supply is limited by the factors like labor, capital, and technology. These factors don't change frequently and the aggregate supply curve is a perfectly inelastic curve (i.e. vertical line). On the other hand, the price level is determined by the aggregate demand for products in the economy. If the demand is less the prices fall and other factors of the economy like wage follows and the economy is again set at perfect equilibrium.  

24) d) barrier to economic growth in the low-income country is lack of investment in research and development.

There are countries in Africa and Asia which are full of natural resources but they still struggle for progress and there are countries which have an abundance of labor ex. India, but they haven't achieved desirable growth.

Savings in a low-income country are significantly low because of the low income of people. And these countries are generally characterised by their huge popullation growth. Declining population is a problem of European and other advanced countries.

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