A decrease in short-run aggregate supply ________ the equilibrium price level and ________ the equilibrium quantity of real GDP.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases

Question

Quizplus · Accepted Answer

A decrease in short-run aggregate supply increases the equilibrium price level due to scarcity of goods and decreases the equilibrium quantity of real GDP because less is being produced.

A Decrease in Short-Run Aggregate Supply ________ the Equilibrium Price