Which of the following statements is correct? I. When economists derive the aggregate demand curve, they are looking at the effect of the price level on one commodity only.
II) Any non-price-level change that increases total planned real spending on domestic goods shifts the AD curve to the right.
A) I only
B) II only
C) Both I and II
D) Neither I nor II

Question

Quizplus · Accepted Answer

Statement I is incorrect because the aggregate demand curve takes into account the effect of the price level on all goods and services in the economy, not just one commodity. Statement II is correct because any increase in total planned real spending, whether from changes in government spending, investment, or consumption, will shift the aggregate demand curve to the right.

Which of the Following Statements Is Correct? I