Along a short-run aggregate supply curve, a decrease in the price level means that
A) output does not change because firms do not change the quantity they produce.
B) more output is produced as consumer demand increases.
C) more output is produced as firms increase production because wages fall more than the price level falls, making it profitable to hire more workers.
D) less output is produced as firms decrease production.

Question

Quizplus · Accepted Answer

In the short-run aggregate supply curve, a decrease in the price level typically leads to a decrease in output because firms reduce production when prices fall, as it may not be profitable to maintain the same level of production.

Along a Short-Run Aggregate Supply Curve, a Decrease in the Price