The equilibrium inflation rate is determined by the intersection of _____ and _____?
Correct answer: C. AD, AS
- A. demand, supply
- B. IS, LM
- C. AD, AS
- D. Labor demand, labor supply
Explanation
The equilibrium price level and inflationary outcome are found where aggregate demand intersects aggregate supply. IS-LM determines interest rates and output under given conditions, not the general price equilibrium by itself.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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