Exhibit 20-5 Money, Investment and Product Markets

Exhibit 20-5 Money, Investment and product markets

-In Exhibit 20-5,a shift in aggregate demand from AD₁ to AD₂:

A) cannot raise real GDP because the economy is at full employment.
B) cannot raise real GDP because the aggregate supply curve is upward sloping at GDP₂.
C) will raise real GDP because the economy is operating below the full-employment level.
D) will cause the interest rate to increase from i₂ to i₁.
E) will raise real GDP but will also significantly raise the price level.