If the short-run macroeconomic equilibrium occurs in the upward-sloping range of the short-run aggregate supply curve, then an increase in input prices will lead to _____ in output and _____ in the price level.
A) an increase; an increase
B) a decrease; a decrease
C) an increase; a decrease
D) a decrease; an increase

Question

Quizplus · Accepted Answer

An increase in input prices will lead to a decrease in output as firms reduce production due to higher costs, and an increase in the price level as firms pass on the higher costs to consumers, leading to inflation.

If the Short-Run Macroeconomic Equilibrium Occurs in the Upward-Sloping Range