Suppose the equilibrium aggregate price level is rising and the equilibrium level of real GDP is falling. Which factor MOST likely caused these changes?
A) an increase in short-run aggregate supply
B) an increase in aggregate demand
C) a decrease in short-run aggregate supply
D) a decrease in aggregate demand

Question

Quizplus · Accepted Answer

A decrease in short-run aggregate supply would lead to higher prices due to the reduced supply of goods and services, while also potentially causing a decrease in real GDP as the economy is unable to produce as much. This scenario aligns with the described conditions of rising prices and falling real GDP.

Suppose the Equilibrium Aggregate Price Level Is Rising and the Equilibrium