ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Total output, or real GDP of an economy
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Price of total output
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The long-term output
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Quantity of a single good
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Detailed explanation-1: -The horizontal axis of the diagram shows real GDP-that is, the level of GDP adjusted for inflation. The vertical axis shows the price level. Price level is the average price of all goods and services produced in the economy.
Detailed explanation-2: -In the AD/AS model, the horizontal axis depicts the total output of the economy (Real GDP) whereas the aggregate price level on the vertical axis. The intersection of AD/AS curves helps to determine the optimal level of both the price level and real GDP of the economy.
Detailed explanation-3: -GDP is measured in the currency of the country in question. That requires adjustment when trying to compare the value of output in two countries using different currencies. The usual method is to convert the value of GDP of each country into U.S. dollars and then compare them.
Detailed explanation-4: -Real GDP is a macroeconomic statistic that measures the value of the goods and services produced by an economy in a specific period, adjusted for inflation. Essentially, it measures a country’s total economic output, adjusted for price changes.
Detailed explanation-5: -In contrast, the horizontal axis of the aggregate demand and aggregate supply diagram measures GDP, which is the sum of all the final goods and services produced in the economy, not the quantity in a specific market.