When the quantity of real GDP demanded exceeds the quantity of real GDP supplied, firms
A)decrease production and increase prices.
B)decrease production and prices.
C)increase production and lower prices.
D)increase production and prices.
E)do not change production because aggregate demand and potential GDP will adjust.

Question

Quizplus · Accepted Answer

When the quantity of real GDP demanded exceeds the quantity of real GDP supplied, firms typically respond by increasing production to meet the higher demand and raising prices due to the increased demand pressure.

When the Quantity of Real GDP Demanded Exceeds the Quantity