In a graph that shows the aggregate supply and aggregate demand curves, what are the variables on the axes of the graph?
A) The price level measured by the implicit price deflator is on the horizontal axis and real GDP is on the vertical axis.
B) The price level measured by the consumer price index is on the vertical axis and real GDP is on the horizontal axis.
C) The price level measured by the implicit price deflator is on the vertical axis and real GDP is on the horizontal axis.
D) The price level measured by the implicit price deflator is on the vertical axis and employment is on the horizontal axis.

Question

Quizplus · Accepted Answer

The standard graph that shows the aggregate supply and demand curves has the price level, as measured by the implicit price deflator, on the vertical axis and real GDP on the horizontal axis. This is because the intersection of these two curves represents the equilibrium level of output and prices in the economy.

In a Graph That Shows the Aggregate Supply and Aggregate