FIGURE 23-3
-Refer to Figure 23-3.Which of the two economies,A or B,will experience more volatile fluctuations in national income in response to aggregate demand shocks?
A)Economies A and B will experience similar volatility because the slopes of the AD curves are the same.
B)Economy A because the large fluctuations in the price level lead to large fluctuations in national income.
C)Economy A because the multiplier is much larger than in Economy B.
D)Economy B because the multiplier is much smaller than in Economy A.
E)Economy B because output is purely demand determined,and there is no offsetting effect from a price level increase.

Question

FIGURE 23-3
-Refer to Figure 23-3.Which of the two economies,A or B,will experience more volatile fluctuations in national income in response to aggregate demand shocks?
A)Economies A and B will experience similar volatility because the slopes of the AD curves are the same. 
B)Economy A because the large fluctuations in the price level lead to large fluctuations in national income. 
C)Economy A because the multiplier is much larger than in Economy B. 
D)Economy B because the multiplier is much smaller than in Economy A. 
E)Economy B because output is purely demand determined,and there is no offsetting effect from a price level increase.

Quizplus · Accepted Answer

Economy B will experience more volatile fluctuations in national income because output is purely demand determined, meaning there is no offsetting effect from a price level increase.

FIGURE 23-3 -Refer to Figure 23-3.Which of the Two Economies,A or B,will