A movement from Point A to Point B in Figure 9.5 would result in
A)A decrease in aggregate demand.
B)A decrease in both aggregate demand and aggregate supply.
C)An increase in aggregate demand.
D)An increase in aggregate demand and a decrease in aggregate supply.

Question

A movement from Point A to Point B in Figure 9.5 would result in
A)A decrease in aggregate demand. 
B)A decrease in both aggregate demand and aggregate supply. 
C)An increase in aggregate demand. 
D)An increase in aggregate demand and a decrease in aggregate supply.

Quizplus · Accepted Answer

Moving from Point A to Point B would cause an increase in the price level (from P1 to P2), resulting in a decrease in the real balances of households and thus an increase in their demand for goods and services. This would in turn cause an increase in aggregate demand. There is no indication in the graph that moving from Point A to Point B would affect aggregate supply.

A Movement from Point a to Point B in Figure