Question

In: Economics

Which of the following is not an assumption made by the dynamic model of aggregate demand and aggregate supply?


Which of the following is not an assumption made by the dynamic model of aggregate demand and aggregate supply? 

 Potential real GDP increases continuously. 

 Aggregate demand shifts to the right during most periods.

 The short-run aggregate supply curve shifts to the right except during periods when workers and firms expect higher wages. 

 Aggregate demand and potential real GDP decrease continuously.

Solutions

Expert Solution

Ans. Aggregate demand and potential real GDP decrease continuously.

Explanation: In the dynamic model of aggregate demand and supply, there is no such assumption that aggregate demand and potential real GDP decrease continuously.

Rahul Sunny answered 2 years ago
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