An increase in aggregate supply will cause the price level to:
A) rise and GDP to rise
B) rise and GDP to fall.
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

An increase in aggregate supply means that there is more output being produced at each price level. This leads to a decrease in prices (i.e. deflation) and an increase in real GDP as more goods and services are being produced. Therefore, the correct answer is D) fall and GDP to rise.

An Increase in Aggregate Supply Will Cause the Price Level