Exhibit 10-7
-In the short run,real and nominal GDP will both decrease whenever
A)aggregate demand decreases,but not always when aggregate supply decreases
B)aggregate supply decreases,but not always when aggregate demand decreases
C)either aggregate demand or supply decreases
D)aggregate supply decreases
E)aggregate supply decreases along a constant aggregate demand curve

Question

Exhibit 10-7 
-In the short run,real and nominal GDP will both decrease whenever
A)aggregate demand decreases,but not always when aggregate supply decreases 
B)aggregate supply decreases,but not always when aggregate demand decreases 
C)either aggregate demand or supply decreases 
D)aggregate supply decreases 
E)aggregate supply decreases along a constant aggregate demand curve

Quizplus · Accepted Answer

In the short run, both real and nominal GDP will decrease when aggregate demand decreases because this leads to a reduction in the overall economic output and price level. However, a decrease in aggregate supply might not always lead to a decrease in nominal GDP, as prices could rise, offsetting the decrease in output.

Exhibit 10-7 -In the Short Run,real and Nominal GDP Will Both Decrease