The AD curve shows the relationship between
A)AS and AE.
B)the price level and desired consumption.
C)real national income and AE.
D)AS and real national income.
E)the price level and the equilibrium level of demand- determined national income.

Question

Quizplus · Accepted Answer

The AD curve shows the relationship between the price level and the equilibrium level of demand-determined national income. This is because AD represents the total spending in the economy, which includes consumer spending, investment spending, government spending, and net exports. As the price level changes, the level of spending in the economy also changes, which in turn affects the level of national income. Consequently, the AD curve shows the different combinations of price level and national income at which the goods and services produced in the economy are demanded by households, firms, and the government.

The AD Curve Shows the Relationship Between