ECONOMICS
AGGREGATE DEMAND
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
price level
|
|
|
price
|
|
|
nominal GDP
|
|
|
Real GDP
|
Detailed explanation-1: -AD/AS model represents GDP on the horizontal axis, while on the vertical axis it represents the price level.
Detailed explanation-2: -The x axis actually shows real (gross) output not GDP per se. Real GDP is an estimate of real output.
Detailed explanation-3: -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-4: -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-5: -The vertical axis represents the price level of all final goods and services. The aggregate price level is measured by either the GDP deflator or the CPI. The horizontal axis represents the real quantity of all goods and services purchased as measured by the level of real GDP.