12.2 Equilibrium in Aggregate Demand and Supply Analysis
AD - AS Equilibrium
-On the graph above,consider a point A on the aggregate supply curve and above the aggregate demand curve.At this point,________.
A)quantity demanded equals output,but the inflation rate will fall,so output will rise
B)quantity demanded is greater than quantity supplied,so the inflation rate will rise
C)output is greater than the quantity demanded,so output will fall
D)the aggregate demand curve will shift to the right until quantity demanded is equal to quantity supplied
E)none of the above

Question

12.2 Equilibrium in Aggregate Demand and Supply Analysis
AD - AS Equilibrium 
-On the graph above,consider a point A on the aggregate supply curve and above the aggregate demand curve.At this point,________.
A)quantity demanded equals output,but the inflation rate will fall,so output will rise 
B)quantity demanded is greater than quantity supplied,so the inflation rate will rise 
C)output is greater than the quantity demanded,so output will fall 
D)the aggregate demand curve will shift to the right until quantity demanded is equal to quantity supplied 
E)none of the above

Quizplus · Accepted Answer

At point A, output is greater than the quantity demanded, which means there is a surplus in the market. This surplus would put downward pressure on prices, causing the inflation rate to fall. In the long run, this would lead to a decrease in output as firms adjust their production levels to the lower demand. Therefore, the correct choice is (C).