$$\begin{array} { | l | l | l | l | }
\hline \begin{array} { l }
\text { Price } \
\text { level }
\end{array} & \begin{array} { l }
\text { A ggregate } \
\text { demand } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { l }
\text { Short-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { l }
\text { Long-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} \
\hline 130 & 8 & 12 & 10 \
\hline 120 & 9 & 11 & 10 \
\hline 110 & 10 & 10 & 10 \
\hline 100 & 11 & 9 & 10 \
\hline 90 & 12 & 8 & 10 \
\hline
\end{array}$$
-The data in the above table indicate that when the price level is 120,
A) firms have unexpectedly high inventories, so prices fall.
B) inventories are at levels planned by firms.
C) firms will plan to increase the level of output.
D) firms have unexpectedly low inventories, so prices will rise.

Question

$$\begin{array} { | l | l | l | l | } 
\hline \begin{array} { l } 
\text { Price } \
\text { level }
\end{array} & \begin{array} { l } 
\text { A ggregate } \
\text { demand } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { l } 
\text { Short-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { l } 
\text { Long-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} \
\hline 130 & 8 & 12 & 10 \
\hline 120 & 9 & 11 & 10 \
\hline 110 & 10 & 10 & 10 \
\hline 100 & 11 & 9 & 10 \
\hline 90 & 12 & 8 & 10 \
\hline
\end{array}$$
-The data in the above table indicate that when the price level is 120,
A) firms have unexpectedly high inventories, so prices fall.
B) inventories are at levels planned by firms.
C) firms will plan to increase the level of output.
D) firms have unexpectedly low inventories, so prices will rise.

Quizplus · Accepted Answer

When the price level is 120, aggregate demand (9) is less than short-run aggregate supply (11), indicating that firms have unexpectedly high inventories, leading to a decrease in prices.

-The Data in the Above Table Indicate That When the |