Which of the following statements is correct? A. The lower the price level, the greater the...

Which of the following statements is correct?

A. The lower the price level, the greater the quantity of real GDP demanded

B. The higher the price level, the more the aggregate demand curve shifts rightward.

C. The lower the price level, the more the aggregate demand curve shifts rightward.

D. The lower the price level, the more the aggregate demand curve shifts leftward.

E. The price level does not effect the level of real GDP demanded.

Solutions

Expert Solution

Ans. The lower the price level, the greater the quantity of real GDP demanded.

A lower price level makes the consumer wealthier and hence increases the consumption expenditure. Since real GDP is positively related to the consumption expenditure, the real GDP demanded also increases.

Rahul Sunny answered 1 year ago

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