Consider the nature of macroeconomic equilibrium.If,at a particular price level,aggregate output demanded is less than that supplied by producers,then
A)the aggregate demand curve will shift to the right,re-establishing an equilibrium.
B)the aggregate supply curve will shift to the left,re-establishing an equilibrium.
C)the aggregate supply curve will shift to the right,re-establishing an equilibrium.
D)the price level will rise toward its equilibrium value.
E)the price level will decline toward its equilibrium value.

Question

Quizplus · Accepted Answer

If aggregate output demanded is less than that supplied by producers, it means there is a surplus in the market. Producers will then lower their prices in order to sell their excess output, which will cause the price level to decline towards its equilibrium value. As the price level falls, aggregate demand will increase while aggregate supply will decrease, eventually reaching a new equilibrium where aggregate output demanded equals aggregate output supplied.

Consider the Nature of Macroeconomic Equilibrium