When the aggregate demand is increased with monetary and/or fiscal policy: (A) T

Question

When the aggregate demand is increased with monetary and/or fiscal policy: (A) The new equilibrium GDP is higher in magnitude, at a higher price level (B) The new equilibrium GDP is lower in magnitude, at a lower price level (C) The new equilibrium GDP is higher in magnitude, at a lower price level (D) The new equilibrium GDP is lower in magnitude, at a higher price level (E) All of the above (F) A and B When the aggregate demand is increased with monetary and/or fiscal policy: (A) The new equilibrium GDP is higher in magnitude, at a higher price level (B) The new equilibrium GDP is lower in magnitude, at a lower price level (C) The new equilibrium GDP is higher in magnitude, at a lower price level (D) The new equilibrium GDP is lower in magnitude, at a higher price level (E) All of the above (F) A and B When the aggregate demand is increased with monetary and/or fiscal policy: (A) The new equilibrium GDP is higher in magnitude, at a higher price level (B) The new equilibrium GDP is lower in magnitude, at a lower price level (C) The new equilibrium GDP is higher in magnitude, at a lower price level (D) The new equilibrium GDP is lower in magnitude, at a higher price level (E) All of the above (F) A and B

Explanation / Answer

When the aggregate demand is increased with monetary and/or fiscal policy then such increase shifts the aggregate demand curve to the right.

Given the aggregate supply, this rightward shift of aggregate demand curve results in an increase in equilibrium price level and equilibrium GDP.

So,

When the aggregate demand is increased with monetary and/or fiscal policy, the new equilibrium GDP is higher in magnitude, at a higher price level.

The correct answer is the option (A).

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.