-Refer to the graphs in the exhibit.What happens to the equilibrium price level in period 1 as the aggregate demand curve shifts from AD to AD'?
A) It falls from 4 to 1.
B) It falls from 4 to 3.
C) It rises from 3 to 4.
D) It rises from 1 to 4.

Question

-Refer to the graphs in the exhibit.What happens to the equilibrium price level in period 1 as the aggregate demand curve shifts from AD to AD'?  
A) It falls from 4 to 1. 
B) It falls from 4 to 3. 
C) It rises from 3 to 4. 
D) It rises from 1 to 4.

Quizplus · Accepted Answer

As the aggregate demand curve shifts from AD to AD', the equilibrium price level in period 1 falls from 4 to 3. This is because the intersection of AD' and the short-run aggregate supply curve occurs to the left of the intersection of AD and the short-run aggregate supply curve, indicating a lower price level.

-Refer to the Graphs in the Exhibit