If Aggregate Demand is at AD2, production will be high as possible. Can production stay at this level foever?Price LevelPrice LevelGDP POTENTIALAD₁GDP POTENTIALASGDP MAXAD₁ASGDP MAXAD2GDPAD2GDPSelect one:O a. No, because eventually, higher aggregate demand will raise prices, and this will make some peopleless willing to do additional workOc. All of these are trueOd. Yes, because this is maximum productione. None of these are trueO b. No, because eventually higher aggregate demand will cause prices to fall, and this will make producersdecide to produce less

A given economy's aggregate demand is the total amount of products and services bought over a…

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If Aggregate Demand is at AD2, production will be high as possible. Can production stay at this level foever?

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter10: Dynamic Change, Economic Fluctuations, And The Ad-as Model

Section: Chapter Questions

Problem 12CQ

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Question

If Aggregate Demand is at AD2, production will be high as possible. Can production stay at this level foever?
Price Level
Price Level
GDP POTENTIAL
AD₁
GDP POTENTIAL
AS
GDP MAX
AD₁
AS
GDP MAX
AD2
GDP
AD2
GDP
Select one:
O a. No, because eventually, higher aggregate demand will raise prices, and this will make some people
less willing to do additional work
Oc. All of these are true
Od. Yes, because this is maximum production
e. None of these are true
O b. No, because eventually higher aggregate demand will cause prices to fall, and this will make producers
decide to produce less

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