The figure shown displays various economic outcomes. If the aggregate demand curve shifts from AD₃ to AD₂, the resulting price and output in the short run would be: A) P ₁ and Y ₂. B) P ₃ and Y ₁. C) P ₂ and Y ₃. D) P ₂ and Y ₁.

Question

Quizplus · Accepted Answer

When the aggregate demand curve shifts from AD₃ to AD₂, the equilibrium level of output will decrease from Y ₃ to Y ₁ due to a decrease in aggregate demand. However, the price level will remain the same at P ₂ because there is no shift in the aggregate supply curve. Therefore, the correct answer is D.

The Figure Shown Displays Various Economic Outcomes