In the aggregate demand and supply model,the:
A) aggregate supply curve is horizontal at full-employment real GDP.
B) vertical axis measures real GDP.
C) vertical axis measures the average price level.
D) All of the above.
E) None of the above.

Question

Quizplus · Accepted Answer

The vertical axis in the aggregate demand and supply model measures the average price level. The aggregate supply curve is typically upward sloping, not horizontal at full-employment real GDP. The vertical axis does not measure real GDP, as this is typically shown on the horizontal axis. Therefore, only choice C is correct.

In the Aggregate Demand and Supply Model,the