Suppose the full employment level of real output (Q)for a hypothetical economy is $500,the price level (P)initially is 100,and prices and wages are flexible both upward and downward.Use the following short-run aggregate supply schedules to answer the question. Refer to the information given.If the price level unexpectedly declines from 100 to 75,the level of real output in the short run will:
A) rise from $500 to $560.
B) fall from $500 to $440.
C) fall from $560 to $500.
D) rise from $440 to $500.

Question

Suppose the full employment level of real output (Q)for a hypothetical economy is $500,the price level (P)initially is 100,and prices and wages are flexible both upward and downward.Use the following short-run aggregate supply schedules to answer the question.  Refer to the information given.If the price level unexpectedly declines from 100 to 75,the level of real output in the short run will:
A) rise from $500 to $560. 
B) fall from $500 to $440. 
C) fall from $560 to $500. 
D) rise from $440 to $500.

Quizplus · Accepted Answer

The Answer is B

Suppose the Full Employment Level of Real Output (Q)for a Hypothetical