Why is the aggregate demand curve downward sloping while the aggregate expenditure line is upward sloping?
What will be an ideal response?
A downward-sloping aggregate demand curve reflects the inverse relationship between the price level and the level of planned aggregate expenditure, while an upward-sloping aggregate expenditure line reflects the positive relationship between real GDP and aggregate expenditure.
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A value of the absolute price elasticity of demand equal to 0.25 indicates that
A) a 5% decrease in price leads to a 2% increase in quantity demanded. B) a 2% decrease in price leads to a 25% increase in quantity demanded. C) a 1% decrease in price leads to a 2.5% increase in quantity demanded. D) a 0.25% decrease in price leads to a 1% increase in quantity.
A constant-cost industry is one in which
A) output increases lead to productivity gains. B) the marginal product of labor is constant. C) there is no change in long-run per-unit costs, even as output varies. D) each firm has a horizontal long-run average cost curve.