Consider a simple macro model with demand- determined output. Other things being equal, the price level and desired aggregate expenditure are related to each other
A)negatively.
B)progressively.
C)proportionally.
D)positively.
E)exponentially.

Question

Quizplus · Accepted Answer

In a demand-determined output model, as the price level increases, the real purchasing power of money decreases, leading to a decrease in desired aggregate expenditure, hence a negative relationship.

Consider a Simple Macro Model with Demand- Determined Output