The figure below shows equilibrium in an aggregate demand-aggregate supply model.The shift from AS to AS' in this figure represents a(n):
Figure 10.3

A)increase in short-run aggregate supply.
B)increase in long-run aggregate supply.
C)decrease in short-run aggregate supply.
D)decrease in long-run aggregate supply.
E)decrease in the aggregate quantity demanded.

Question

The figure below shows equilibrium in an aggregate demand-aggregate supply model.The shift from AS to AS' in this figure represents a(n):​ ​
Figure 10.3

A)increase in short-run aggregate supply. 
B)increase in long-run aggregate supply. 
C)decrease in short-run aggregate supply. 
D)decrease in long-run aggregate supply. 
E)decrease in the aggregate quantity demanded.

Quizplus · Accepted Answer

The shift from AS to AS' represents an increase in short-run aggregate supply. This is because at the initial equilibrium (E), the intersection of the AD and AS curves, the quantity supplied is equal to the quantity demanded. However, with the shift to AS', there is an increase in the quantity supplied at any given price level. This indicates that there has been an increase in the short-run aggregate supply.

The Figure Below Shows Equilibrium in an Aggregate Demand-Aggregate Supply