The intersection of the aggregate demand and aggregate supply curves determines the
A) productivity level in the economy.
B) shape of the aggregate demand curve.
C) per-unit cost of production in the economy.
D) equilibrium level of real domestic output and prices.

Question

Quizplus · Accepted Answer

The intersection of the aggregate demand and aggregate supply curves determines the equilibrium level of real domestic output and prices in the economy. It is the point where the quantity of goods and services that firms are willing to supply equals the quantity that households and businesses are willing to buy at a given price level. This is the state of equilibrium where there is no excess supply or demand in the market.

The Intersection of the Aggregate Demand and Aggregate Supply Curves