-Refer to Figure 15-6.If the price level is currently at 140,what would we expect to occur in the short run?
A) The price level will remain at 140 and businesses will cut production to $5.5 trillion.
B) The price level will remain at 140 and the extra $2 trillion in real GDP will be saved for future use.
C) The aggregate supply curve will shift upward until it intersects the aggregate demand curve at a price level of 140 and real GDP of $5.5 trillion.
D) The aggregate demand curve will shift right until it intersects the aggregate supply curve at a price level of 140 and real GDP of $7.5 trillion.
E) Inventories will accumulate and businesses will cut production until equilibrium is reached at a price level of 120 and real GDP of $6.5 trillion.

Question

-Refer to Figure 15-6.If the price level is currently at 140,what would we expect to occur in the short run?
A) The price level will remain at 140 and businesses will cut production to $5.5 trillion. 
B) The price level will remain at 140 and the extra $2 trillion in real GDP will be saved for future use. 
C) The aggregate supply curve will shift upward until it intersects the aggregate demand curve at a price level of 140 and real GDP of $5.5 trillion. 
D) The aggregate demand curve will shift right until it intersects the aggregate supply curve at a price level of 140 and real GDP of $7.5 trillion. 
E) Inventories will accumulate and businesses will cut production until equilibrium is reached at a price level of 120 and real GDP of $6.5 trillion.

Quizplus · Accepted Answer

In the short run, if the price level is above equilibrium, inventories will accumulate as supply exceeds demand. Businesses will cut production, leading to a decrease in the price level and real GDP until equilibrium is reached.