The equilibrium price level
A) determines by how much the AD curve shifts
B) is inversely related to the nominal wage rate
C) is influenced by the pricing behavior of all the firms in the economy
D) is unaffected by changes in resource costs
E) is the same thing as the interest rate

Question

Quizplus · Accepted Answer

The equilibrium price level is determined by the pricing behavior of all the firms in the economy. It is the price level at which aggregate demand and aggregate supply intersect. This intersection occurs where the quantity of real GDP demanded equals the quantity of real GDP supplied at that price level. Therefore, it depends on the prices set by all firms in the economy.

The Equilibrium Price Level