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If the supply of final goods is assumed to be infinitely elastic at constant price over a short period of time, aggregate output is determined solely by the value of aggregate demand. This statement is called _________ Principle.

Solution

Correct Option: 3

Key concept -> is effective demand -> which means actual demand.

  1. Aggregate supply -> not correct
  2. Aggregate demand -> related but
  3. Effective demand -> correct answer
  4. Perfectly inelastic demand -> not relevant

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