The figure above shows an economy's aggregate demand curve and aggregate supply curve.
-Suppose the shift from AD₀ to AD₁ and from AS₀ to AS₁ is the result of fiscal policy. If the effect on aggregate supply was larger than the figure above shows, as a result the price level would be ________ 110 and real GDP would be ________ $17 trillion.

Question

The figure above shows an economy's aggregate demand curve and aggregate supply curve. -Suppose the shift from AD<sub>0</sub> to AD<sub>1</sub> and from AS<sub>0</sub> to AS<sub>1</sub> is the result of fiscal policy. If the effect on aggregate supply was larger than the figure above shows, as a result the price level would be ________ 110 and real GDP would be ________ $17 trillion. A) higher than; larger than B) smaller than; less than C) equal to; equal to D) smaller than; larger than E) equal to; larger than

Quizplus · Accepted Answer

If the effect on aggregate supply was larger, it would lead to a decrease in the price level and an increase in real GDP, as a larger shift in aggregate supply would result in more goods and services being available at a lower price.

The Figure Above Shows an Economy's Aggregate Demand Curve and Aggregate