The aggregate demand (ADI)curve shows the relationship between inflation and the
A) nominal interest rate.
B) real interest rate.
C) unemployment rate.
D) exchange rate.
E) short-run equilibrium output.

Question

Quizplus · Accepted Answer

The ADI curve shows the relationship between the price level (inflation) and the level of output (equilibrium output) in the short run, holding all other factors constant. The curve slopes downwards, indicating that as the price level rises, the level of output falls due to the higher costs of production and reduced purchasing power of consumers. The other choices (nominal interest rate, real interest rate, unemployment rate, and exchange rate) are not directly related to the ADI curve but may have an indirect effect on it through their impact on other factors such as consumer spending, investment, and net exports.

The Aggregate Demand (ADI)curve Shows the Relationship Between Inflation and the