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 at any given price level, producers are willing and able to supply more output due to factors such as lower input costs or improved technology. This results in an increase in real GDP and a decrease in the price level, as shown by the movement from point A to point B on the graph.

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