The aggregate demand curve shows the combinations of output and the price level that put the economy on
A)the FE line and the IS curve.
B)the FE line, the IS curve, and the LM curve.
C)the IS curve.
D)the IS curve and the LM curve.

Question

Quizplus · Accepted Answer

The aggregate demand curve shows the combinations of output and the price level that put the economy on the IS curve and the LM curve, because it represents the demand for goods and services (IS curve) and the demand for money (LM curve) at any given price level in the economy. The FE line is a separate concept that represents the long-run potential output of the economy.

The Aggregate Demand Curve Shows the Combinations of Output and the Price