The correct option is D. Shocks to aggregate demand and supply cause fluctuations in GDP and employment in the short run.

Here's why:

A. The aggregate demand curve does not slope upward. It slopes downward because as the price level decreases, the quantity of goods and services demanded increases.

B. The long-run aggregate supply curve is not horizontal. It is vertical because in the long run, the economy's output of goods and services (GDP) is determined by its supplies of labor, capital, and natural resources and the available technology used to turn these factors of production into goods and services. It does not depend on the overall level of prices.

C. The short-run aggregate supply curve is not vertical. It is upward sloping. In the short run, the quantity of output that firms produce and sell can deviate from the natural level of output if the actual price level in the economy deviates from the price level that people expected.

D. Shocks to aggregate demand and supply can indeed cause fluctuations in GDP and employment in the short run. This is because in the short run, prices are sticky and do not adjust immediately to changes in supply or demand. Therefore, changes in aggregate demand or supply can lead to temporary increases or decreases in an economy's production and employment.

Question

The correct option is D. Shocks to aggregate demand and supply cause fluctuations in GDP and employment in the short run.

Here's why:

A. The aggregate demand curve does not slope upward. It slopes downward because as the price level decreases, the quantity of goods and services demanded increases.

B. The long-run aggregate supply curve is not horizontal. It is vertical because in the long run, the economy's output of goods and services (GDP) is determined by its supplies of labor, capital, and natural resources and the available technology used to turn these factors of production into goods and services. It does not depend on the overall level of prices.

C. The short-run aggregate supply curve is not vertical. It is upward sloping. In the short run, the quantity of output that firms produce and sell can deviate from the natural level of output if the actual price level in the economy deviates from the price level that people expected.

D. Shocks to aggregate demand and supply can indeed cause fluctuations in GDP and employment in the short run. This is because in the short run, prices are sticky and do not adjust immediately to changes in supply or demand. Therefore, changes in aggregate demand or supply can lead to temporary increases or decreases in an economy's production and employment.

Knowee AI · Accepted Answer

The correct option is D. Shocks to aggregate demand and supply cause fluctuations in GDP and employment in the short run.

Here's why:

A. The aggregate demand curve does not slope upward. It slopes downward because as the price level decreases, the quantity of goods and services demanded increases.

B. The long-run aggregate supply curve is not horizontal. It is vertical because in the long run, the economy's output of goods and services (GDP) is determined by its supplies of labor, capital, and natural resources and the available technology used to turn these factors of production into goods and services. It does not depend on the overall level of prices.

C. The short-run aggregate supply curve is not vertical. It is upward sloping. In the short run, the quantity of output that firms produce and sell can deviate from the natural level of output if the actual price level in the economy deviates from the price level that people expected.

D. Shocks to aggregate demand and supply can indeed cause fluctuations in GDP and employment in the short run. This is because in the short run, prices are sticky and do not adjust immediately to changes in supply or demand. Therefore, changes in aggregate demand or supply can lead to temporary increases or decreases in an economy's production and employment.

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