Which of the following statements about the economy's aggregate demand curve is correct? All points on the AD curve
A)correspond to a particular point on industry demand curves for a particular product.
B)relate a particular price level to the total demand for output at that price level.
C)show only changes in relative prices and quantities.
D)show the direct relationship between the price level and net exports.
E)show the direct relationship between the price level and the demand for consumer goods.

Question

Quizplus · Accepted Answer

The aggregate demand (AD) curve shows the relationship between the overall price level and the total quantity of output demanded in the economy. Therefore, all points on the AD curve relate a particular price level to the total demand for output at that price level. Choice A is incorrect because industry demand curves relate a particular price level to the quantity demanded for a specific product, not the overall demand in the economy. Choice C is incorrect because the AD curve shows both price and quantity changes. Choice D is incorrect because net exports are only one component of aggregate demand and not the sole driver of the AD curve. Choice E is incorrect because the AD curve is not solely based on the demand for consumer goods, but rather the demand for all goods and services in the economy.

Which of the Following Statements About the Economy's Aggregate Demand