The quantity of real GDP demanded equals $18.2 trillion when the price level is 90. If the price level rises to 95, the quantity of real GDP demanded equals
A) less than $18.2 trillion.
B) $18.2 trillion.
C) more than $18.2 trillion.
D) more information is needed to determine if the quantity of real GDP demanded increases, decreases, or does not change.

Question

Quizplus · Accepted Answer

When the price level rises, the quantity of real GDP demanded typically decreases due to the wealth effect, interest rate effect, and international trade effect. Therefore, if the price level rises from 90 to 95, the quantity of real GDP demanded would be less than $18.2 trillion.

The Quantity of Real GDP Demanded Equals $18