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What does aggregate demand refer to in the AD/AS model?
ATotal spending on domestic goods and services
BThe total output a single firm can produce
CThe unemployment rate tracked by the government
DThe interest rate charged on government bonds
Answer & Solution
Correct answer: A. Total spending on domestic goods and services
1. Aggregate demand is the macroeconomic counterpart of total spending, not any single firm's output.
2. It adds up consumption, investment, government spending, and net exports across the whole economy.
3. It is not the unemployment rate or a bond interest rate, which are separate macroeconomic variables.
4. The aggregate demand curve then shows this total spending at each possible price level.
_Source: OpenStax Principles of Macroeconomics for AP Courses (CC BY 4.0), Ch 10 "The Aggregate Demand/Aggregate Supply Model", section 10.2 | Building a Model of Aggregate Demand and Aggregate Supply_
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