In the aggregate demand and aggregate supply model,
A) the factors that cause the demand curves in both models to slope downward are the same.
B) the factors that cause the supply curves in both models to slope upward are the same.
C) the upward-sloping aggregate demand curve intersects the downward-sloping aggregate supply curve to determine the economy's price level and GDP.
D) the upward-sloping aggregate supply curve intersects the downward-sloping aggregate demand curve to determine the economy's price level and GDP.
E) the price level never changes even with shifts in aggregate demand and aggregate supply.

Question

Quizplus · Accepted Answer

In the aggregate demand and aggregate supply model, the upward-sloping aggregate supply curve intersects the downward-sloping aggregate demand curve to determine the economy's price level and GDP. The factors that cause the demand curves in both models to slope downward are not necessarily the same as the factors that cause the supply curves in both models to slope upward. The price level does change with shifts in aggregate demand and aggregate supply, as shown by movements along the curves and shifts of the curves themselves.

In the Aggregate Demand and Aggregate Supply Model