ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Aggregate supply is the total quantity of output firms will produce and sell-in other words, the real GDP. Aggregate demand is the amount of total spending on domestic goods and services in an economy.

Detailed explanation-2: -The correct answer is: D. The model of the aggregate demand and the aggregate supply explains how the macroeconomic equilibrium is attained. In this model, the equilibrium price level and the equilibrium real GDP are determined at the point where the aggregate demand is equal to the aggregate supply.

Detailed explanation-3: -Explain that from a macroeconomic perspective, an increase in the aggregate price level diminishes all buyers’ purchasing power. Thus, as the aggre-gate price level rises, the quantity of aggregate output demanded decreases, as illustrated by the downward-sloping aggregate demand curve.

Detailed explanation-4: -The higher the price level, the lower the aggregate expenditures curve and the lower the equilibrium level of real GDP. The lower the price level, the higher the aggregate expenditures curve and the higher the equilibrium level of real GDP.