The aggregate demand curve illustrates the relationship between
A)the price level and the quantity of goods demanded by households,firms,government,and foreigners.
B)the real wage rate and the hours of labor demanded by firms.
C)the price level and the potential quantity demanded of real GDP.
D)the price level and the quantity of goods supplied by firms.
E)the price level and the potential demand for real GDP.

Question

Quizplus · Accepted Answer

The aggregate demand curve shows the relationship between the price level and the quantity of goods and services demanded by households, firms, government, and foreigners. It shows the amount of real GDP that buyers in the economy are willing and able to purchase at different price levels. Therefore, option A is the correct choice. Option B is incorrect as it refers to the labor market, not the overall economy. Option C is incorrect because it uses the word "potential" which is vague and not helpful in explaining the relationship. Option D is incorrect because the aggregate supply curve illustrates the relationship between the price level and the quantity of goods supplied by firms, not the aggregate demand curve. Option E is incorrect because it is incomplete and does not specify what is being demanded.

The Aggregate Demand Curve Illustrates the Relationship Between