A decrease in aggregate supply will tend to cause the price level to:
A)rise and GDP to fall.
B)rise and GDP to rise.
C)rise and the unemployment rate to fall.
D)fall and GDP to rise.
E)fall and the unemployment rate to rise.

Question

Quizplus · Accepted Answer

A decrease in aggregate supply means that there are fewer goods and services available in the economy, leading to higher prices. This is known as cost-push inflation. As a result, the price level would rise and GDP would fall, as there are fewer goods and services being produced.

A Decrease in Aggregate Supply Will Tend to Cause the Price