In the aggregate demand and aggregate supply model,
A) the factors that cause the individual demand curve to slope downward are the same as the factors that cause the aggregate demand curve to slope downward.
B) the factors that cause the individual supply curve to slope upward are the same as the factors that cause the short-run aggregate supply curve to slope upward.
C) the upward-sloping aggregate demand curve intersects the downward-sloping short-run aggregate supply curve to determine the economy's price level and GDP.
D) the upward-sloping short-run aggregate supply curve intersects the downward-sloping aggregate demand curve to determine the economy's price level and GDP.

Question

Quizplus · Accepted Answer

The factors that cause the individual supply curve to slope upward are different from the factors that cause the short-run aggregate supply curve to slope upward, so option B is incorrect. The upward-sloping short-run aggregate supply curve intersects the downward-sloping aggregate demand curve to determine the economy's price level and GDP in the short run, which makes option D correct. Option A is incorrect because the factors that cause the individual demand curve to slope downward are different from the factors that cause the aggregate demand curve to slope downward. Option C is also incorrect because the intersection of the upward-sloping aggregate demand curve with the downward-sloping short-run aggregate supply curve does not determine the economy's price level and GDP, but rather the intersection of the short-run aggregate supply curve with the aggregate demand curve does.

In the Aggregate Demand and Aggregate Supply Model