In the figure above, the economy is at an equilibrium with real GDP of $10 trillion and a price level of 110. As the economy moves toward its ultimate equilibrium, the ________ curve will shift ________.
A)aggregate supply; leftward
B)aggregate supply; rightward
C)aggregate demand; rightward
D)aggregate demand; leftward
E)potential GDP; rightward

Question

Quizplus · Accepted Answer

As the economy moves toward its ultimate equilibrium, there would be a decrease in the price level due to the decrease in demand for goods and services. This would result in a leftward shift of the aggregate supply curve, as the producers would reduce production levels to match the reduced demand.

In the Figure Above, the Economy Is at an Equilibrium