Suppose the full-employment level of real output (Q) for a hypothetical economy is $500 and that the price level (P) initially is 100.Use the following short-run aggregate supply schedules to answer the next question. Refer to the information above.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 and that the price level (P) initially is 100.Use the following short-run aggregate supply schedules to answer the next question.  Refer to the information above.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

According to the short-run aggregate supply schedules, when the price level decreases from 100 to 75, the quantity of real output supplied decreases from 530 to 470. This means that in the short run, the level of real output will fall from $500 to $440.

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