Answer:
D). The price level and leave real output unchanged.
Explanation:
The long-run impact of an increase in household consumption is to elevate 'the price-level and leave real output unchanged.' The increased consumption would lead to a rise in demand which will correspond to an increase in out and decrease in unemployment.
As per the long-run self-adjustment mechanism, this shock in the economy will lead to inflation while the increase in Aggregate demand would correspond to an increase in prices and GDP. The inflation would increase the labor charges and therefore, the firms would produce less and it keeps falling until the full employment output is achieved. Thus, the long-run effect would be that GDP returns to its previous state(unchanged) while the prices are still higher. Hence, <u>option D</u> is the correct answer.
Answer:
e. a and c
Explanation:
The law of demand states that the higher the price, the lower the quantity demanded and the lower the price, the higher the quantity demanded. This occurs because of the law of diminishing marginal utility.
The law of diminishing marginal utility states that the more of a commodity is consumed, the lower the utility derived from the consumption of the product.
It follows that Jorge and karissa would demand less of pencils and sweaters as their prices rise.
The demand curve is usually downward sloping to illustrate the law of demand.
