The figure below shows equilibrium in an aggregate demand-aggregate supply model.The shift from AS to AS' in this figure represents a(n):

A)increase in short-run aggregate supply.
B)increase in long-run aggregate supply.
C)decrease in short-run aggregate supply.
D)decrease in long-run aggregate supply.
E)decrease in the aggregate quantity demanded.

Question

The figure below shows equilibrium in an aggregate demand-aggregate supply model.The shift from AS to AS' in this figure represents a(n):

A)increase in short-run aggregate supply. 
B)increase in long-run aggregate supply. 
C)decrease in short-run aggregate supply. 
D)decrease in long-run aggregate supply. 
E)decrease in the aggregate quantity demanded.

Quizplus · Accepted Answer

The shift from AS to AS' represents an increase in short-run aggregate supply. This is because the equilibrium output increases from Y to Y', indicating that the economy can produce more output at the same price level.

The Figure Below Shows Equilibrium in an Aggregate Demand-Aggregate Supply