Figure 10-1

-If the price level in Figure 10-1 were 100,
A)firms would have to lower their prices.
B)inventories would be accumulating.
C)shortages of goods would exist.
D)aggregate quantity demanded would exceed aggregate quantity supplied.
E)both c and d would occur.

Question

Figure 10-1
​ 
-If the price level in Figure 10-1 were 100,
A)firms would have to lower their prices. 
B)inventories would be accumulating. 
C)shortages of goods would exist. 
D)aggregate quantity demanded would exceed aggregate quantity supplied. 
E)both c and d would occur.

Quizplus · Accepted Answer

When the price level is set at a point where it is lower than the equilibrium price, it leads to a situation where the aggregate quantity demanded exceeds the aggregate quantity supplied, creating shortages of goods. This is because at lower prices, consumers are willing to buy more than what is being produced, leading to both shortages (choice C) and a situation where aggregate quantity demanded exceeds aggregate quantity supplied (choice D).

Figure 10-1 ​

Figure 10-1