After examining international data, the economist Robert Lucas found that aggregate demand has the biggest effect on output in countries where aggregate demand:
A) and prices are most stable.
B) and prices are most variable.
C) is most stable but prices are most variable.
D) is most variable but prices are most stable.

Question

Quizplus · Accepted Answer

The question asks about the effect of aggregate demand on output in different countries, and specifically asks about the relationship between aggregate demand and prices. According to the economist Robert Lucas, aggregate demand has the biggest effect on output in countries where aggregate demand and prices are most stable. This makes sense because stability in both aggregate demand and prices provides a more predictable economic environment, which can lead to greater confidence and investment by businesses and consumers. In contrast, if either aggregate demand or prices are highly variable, it can create uncertainty and volatility in the economy, which can negatively affect output.

After Examining International Data, the Economist Robert Lucas Found That