In the aggregate demand-aggregate supply model, the economy's price level is assumed to be:
A) Constant, just like in the aggregate expenditures model
B) Variable, just like in the aggregate expenditures model
C) Constant, unlike in the aggregate expenditures model
D) Variable, unlike in the aggregate expenditures model

Question

Quizplus · Accepted Answer

In the aggregate demand-aggregate supply model, the economy's price level is assumed to be variable, unlike in the aggregate expenditures model where it is assumed to be constant. This is because changes in aggregate demand or supply can cause inflation or deflation, leading to changes in the overall price level of the economy.

In the Aggregate Demand-Aggregate Supply Model, the Economy's Price Level