A decrease in aggregate supply means:
A) Both the real domestic output and the price level would decrease
B) The real domestic output would increase and rises in the price level would become smaller
C) The real domestic output would decrease and the price level would rise
D) Both the real domestic output and rises in the price level would become greater

Question

Quizplus · Accepted Answer

A decrease in aggregate supply means that there is a decrease in the total amount of goods and services produced in the economy. This would cause a decrease in real domestic output (GDP). Additionally, with a lower supply of goods and services, prices would rise due to increased demand. Therefore, the price level would rise along with the decrease in real domestic output.

A Decrease in Aggregate Supply Means