The various quantities of all final commodities demanded at various price levels, ceteris paribus, is the
A) LRAS.
B) production possibilities curve.
C) aggregate demand curve.
D) aggregate supply curve.

Question

Quizplus · Accepted Answer

The aggregate demand (AD) curve shows the various quantities of all final goods and services that consumers, businesses, and governments are willing and able to purchase at various price levels, ceteris paribus. It is a downward-sloping curve because as prices decrease, quantity demanded increases due to the wealth effect, interest rate effect, and foreign trade effect. The LRAS (A) represents the productive capacity of an economy in the long run, while the production possibilities curve (B) shows the maximum combinations of two goods that a society can produce with its available resources. The aggregate supply (D) curve shows the various quantities of goods and services that firms are willing and able to produce at various price levels, ceteris paribus.

The Various Quantities of All Final Commodities Demanded at Various