Use the following graph to answer the following questions.

-If point A occurs chronologically before point B,then this graph could represent
A) a decrease in aggregate demand with a decrease in long-run and short-run aggregate supply.
B) an increase in aggregate demand with constant long-run and short-run aggregate supply.
C) a decrease in aggregate demand with constant long-run and short-run aggregate supply.
D) constant aggregate demand with a decline in long-run aggregate supply.
E) constant aggregate demand with a decline in short-run aggregate supply.

Question

Use the following graph to answer the following questions.
 
-If point A occurs chronologically before point B,then this graph could represent
A) a decrease in aggregate demand with a decrease in long-run and short-run aggregate supply. 
B) an increase in aggregate demand with constant long-run and short-run aggregate supply. 
C) a decrease in aggregate demand with constant long-run and short-run aggregate supply. 
D) constant aggregate demand with a decline in long-run aggregate supply. 
E) constant aggregate demand with a decline in short-run aggregate supply.

Quizplus · Accepted Answer

The graph shows a decrease in aggregate demand (shift to the left of the AD curve) with a constant long-run (LRAS) and short-run (SRAS) aggregate supply. The point A indicates the initial equilibrium, and point B indicates the new equilibrium after the decrease in aggregate demand. The output (real GDP) decreases, while the price level also decreases or remains constant. This scenario is consistent with a recession or economic downturn, where there is a decrease in overall spending in the economy.

Use the Following Graph to Answer the Following Questions