Other things equal, a decrease in the price level will
A) shift the aggregate supply curve to the left.
B) shift the aggregate demand curve to the left.
C) cause a movement up a short-run aggregate supply curve.
D) cause a movement down an aggregate supply curve.

Question

Quizplus · Accepted Answer

A decrease in price level will cause a movement down along the same short-run aggregate supply curve, as firms are willing to produce more output at lower prices due to lower production costs and higher profits. Therefore, there is no shift in either the aggregate supply or the aggregate demand curve.

Other Things Equal, a Decrease in the Price Level Will