CFA Practice Question

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CFA Practice Question

An increase in aggregate demand ______

A. raises potential output.
B. reduces potential output.
C. does not change potential output.
Correct Answer: C

Potential output is the long-run output level an economy can produce given the quantity of inputs available, the prices of these inputs, and production technology. It depends on supply conditions, not aggregate demand.

User Contributed Comments 7

User Comment
danlan Distinguish short run and long run aggregate demand
cahiz84 Increase short run real output
viannie LR GDP depends only on supply that is the reason we need the field of economics to allocate the rare resources. Demand is when we have real money on hand where we can exchange for goods and services (availability depends solely on the supply curve).

Price level => AD
real GDP => AS
Oarona You explained it well viannie
AUAU Thanks Viannie.

Good explanation.
bundy Out put has to do with supply not demand
jpducros bundy, I'm not sure your reasoning is supported by Keynessians.
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