Refer to the above figure. Suppose the original long-run equilibrium was at point B. What could have caused the move to the current equilibrium?
A) Decreases in the price level caused short-run aggregate supply to fall.
B) Input prices must have increased, causing long-run aggregate supply to increase.
C) Aggregate demand must have decreased.
D) A temporary reduction in production due to bad weather.

Question

Quizplus · Accepted Answer

A move from point B to the current equilibrium, where both the aggregate demand and short-run aggregate supply curves have shifted to the left, indicates a decrease in aggregate demand. This shift could be due to factors such as decreased consumer spending, investment, government spending, or net exports. The other options do not accurately describe a scenario where both curves shift leftward to a new equilibrium at a lower price level and output.

Refer to the Above Figure