In the aggregate demand and aggregate supply model:
A) the factors that cause the demand curves in both models to slope downward are the same.
B) the factors that cause the supply curves in both models to slope upward are the same.
C) the upward-sloping aggregate demand curve intersects the downward-sloping aggregate supply curve to determine the economy's price level and GDP.
D) the upward-sloping aggregate supply curve intersects the downward-sloping aggregate demand curve to determine the economy's price level and GDP.

Question

Quizplus · Accepted Answer

The upward-sloping aggregate supply curve intersects the downward-sloping aggregate demand curve to determine the economy's price level and GDP. This is because the intersection point represents equilibrium in the market, where the quantity demanded equals the quantity supplied at a certain price level. The factors that cause the demand and supply curves to slope downward and upward respectively may differ, but it is the intersection point that determines the overall state of the economy.

In the Aggregate Demand and Aggregate Supply Model