Because the short-run aggregate expenditure model assumes that the price level is ________, its predicted effect of changes in autonomous expenditure on equilibrium output is ________ than the prediction of the AD/SAS model.
A) fixed; greater
B) fixed; less
C) flexible; greater
D) flexible; less

Question

Quizplus · Accepted Answer

In the short-run aggregate expenditure model, the price level is assumed to be fixed, which means that changes in autonomous expenditure have a more direct and significant impact on equilibrium output compared to the AD/SAS model, where prices can adjust.

Because the Short-Run Aggregate Expenditure Model Assumes That the Price