If a country's short-run aggregate supply falls, output _____, and the price level:
A) rises: rises.
B) rises; falls.
C) falls; rises.
D) falls; falls.

Question

Quizplus · Accepted Answer

When a country's short-run aggregate supply falls, output decreases because there are fewer goods and services being produced. This scarcity typically leads to an increase in the price level as demand outstrips supply, causing inflation.

If a Country's Short-Run Aggregate Supply Falls, Output _____, and the Price