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NEW QUESTION: 1
Within the framework of the aggregate demand/aggregate supply model, an increase in short run
aggregate supply will cause:
A. Real output to expand and the price level to rise.
B. Real output to expand and the price level to fall.
C. Real output to decline and the price level to rise.
D. Real output to decline and the price level to fall.
Choice "a" is correct. A shift right in short run aggregate supply causes output to increase and the price
level to fall.
Choice "b" is incorrect. Real output would rise, not fall.
Choice "c" is incorrect. The price level would fall, not rise.
Choice "d" is incorrect. Real output would rise, not fall.