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Question : Which of the following assumptions is made to determine the level of aggregate demand for final goods in the economy?
I. A constant final goods price and constant rate of interest over the short run are assumed.
II. The aggregate supply is assumed to be perfectly elastic.

Option 1: Only II

Option 2: Only I

Option 3: Neither I nor II

Option 4: Both I and II


Team Careers360 13th Jan, 2024
Answer (1)
Team Careers360 24th Jan, 2024

Correct Answer: Both I and II


Solution : The correct answer is Both I and II .

A constant final goods price and constant rate of interest over the short run are assumed as it helps to analyse the relationship between aggregate demand, and other macroeconomic variables such as consumption, investment, and government spending. The aggregate supply is assumed to be perfectly elastic.

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