If a change in real GDP causes the price level to change,there will be a movement along the aggregate supply curve.

Question

Quizplus · Accepted Answer

A change in real GDP will cause a movement along the aggregate supply curve, specifically along the short-run aggregate supply (SRAS) curve. This is because in the short run, prices are sticky and firms adjust their output in response to changes in demand. As output increases, firms may increase prices as they reach full capacity, causing a movement up along the SRAS curve. Conversely, if output decreases, firms may decrease prices in order to maintain demand, causing a movement down along the SRAS curve.

If a Change in Real GDP Causes the Price Level