A decrease in aggregate supply will cause the price level to:
A) rise and GDP to fall.
B) rise and GDP to rise.
C) rise and the unemployment rate to fall.
D) fall and GDP to rise.
E) fall and the unemployment rate to rise.

Question

Quizplus · Accepted Answer

A decrease in aggregate supply typically leads to higher prices (inflation) and a reduction in GDP, as there is less output available in the economy.

A Decrease in Aggregate Supply Will Cause the Price Level