If,at the prevailing price level,the aggregate quantity supplied exceeds the aggregate quantity demanded,the price level will tend to fall.

Question

Quizplus · Accepted Answer

This statement is the basic principle of the law of supply and demand. When there is an excess supply (quantity supplied exceeds quantity demanded), suppliers compete with each other to sell their products, leading to lower prices. This process continues until the quantity supplied and the quantity demanded come into equilibrium at a lower price level.

If,at the Prevailing Price Level,the Aggregate Quantity Supplied Exceeds the Aggregate