Questions: The aggregate supply curve Multiple Choice is explained by the interest-rate, real-balances, and foreign purchases effects. gets steeper as the economy moves from the top of the curve to the bottom of the curve. shows the various amounts of real output that businesses will produce at each price level. is downward-sloping because real purchasing power increases as the price level falls.

The aggregate supply curve

Multiple Choice
is explained by the interest-rate, real-balances, and foreign purchases effects.
gets steeper as the economy moves from the top of the curve to the bottom of the curve.
shows the various amounts of real output that businesses will produce at each price level.
is downward-sloping because real purchasing power increases as the price level falls.
Transcript text: The aggregate supply curve Multiple Choice is explained by the interest-rate, real-balances, and foreign purchases effects. gets steeper as the economy moves from the top of the curve to the bottom of the curve. shows the various amounts of real output that businesses will produce at each price level. is downward-sloping because real purchasing power increases as the price level falls.
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Solution

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The answer is the third one: shows the various amounts of real output that businesses will produce at each price level.

Explanation for each option:

  • First option: "is explained by the interest-rate, real-balances, and foreign purchases effects." This is incorrect. These effects are typically used to explain the downward slope of the aggregate demand curve, not the aggregate supply curve.

  • Second option: "gets steeper as the economy moves from the top of the curve to the bottom of the curve." This is incorrect. The aggregate supply curve generally becomes steeper as the economy moves from the bottom to the top, especially in the short run, due to capacity constraints and increasing costs.

  • Third option: "shows the various amounts of real output that businesses will produce at each price level." This is correct. The aggregate supply curve represents the relationship between the price level and the quantity of goods and services that firms are willing to produce.

  • Fourth option: "is downward-sloping because real purchasing power increases as the price level falls." This is incorrect. The aggregate supply curve is typically upward-sloping in the short run because higher price levels can lead to higher output as firms respond to higher prices by increasing production.

In summary, the aggregate supply curve illustrates the relationship between the price level and the quantity of output that firms are willing to supply, making the third option the correct choice.

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