A decrease in short-run aggregate supply____________ the equilibrium price level and ____________the equilibrium quantity of real GDP.
A) increases; decreases
B) decreases; increases
C) decreases; decreases
D) increases; increases

Question

Quizplus · Accepted Answer

A decrease in short-run aggregate supply leads to a higher equilibrium price level due to reduced supply, and a lower equilibrium quantity of real GDP as less output is produced.

A Decrease in Short-Run Aggregate Supply____________ the Equilibrium Price Level