The figure below shows equilibrium in an aggregate demand-aggregate supply model.In this figure,the shift from AS to AS' is likely to occur when:

A)the actual price level is higher than expected.
B)the actual price level is lower than expected.
C)the unemployment rate is lower than the natural rate.
D)the actual output is more than the potential output.
E)the aggregate demand curve intersects the short-run aggregate supply curve at the potential output.

Question

The figure below shows equilibrium in an aggregate demand-aggregate supply model.In this figure,the shift from AS to AS' is likely to occur when:

A)the actual price level is higher than expected. 
B)the actual price level is lower than expected. 
C)the unemployment rate is lower than the natural rate. 
D)the actual output is more than the potential output. 
E)the aggregate demand curve intersects the short-run aggregate supply curve at the potential output.

Quizplus · Accepted Answer

The shift from AS to AS' indicates a decrease in short-run aggregate supply. This can occur when the actual price level is lower than expected, causing firms to reduce production and supply.

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