When the price level is below the level at which the aggregate demand curve crosses the long run aggregate supply curve
A) there will be no price level change.
B) there will be pressures that will lead to a shift of either the aggregate demand or the long run aggregate supply curves.
C) total planned real expenditures will exceed actual real GDP, and the price level will increase.
D) total planned real expenditure will be lower than actual real GDP, and the price level will increase.

Question

Quizplus · Accepted Answer

When the price level is below the level at which the aggregate demand curve crosses the long-run aggregate supply curve, it indicates that the demand for goods and services is higher than what is being produced at current prices, leading to an increase in the price level as the economy moves towards equilibrium. This scenario is described by option C, where total planned real expenditures exceed actual real GDP, prompting an increase in the price level to balance demand with supply.

When the Price Level Is Below the Level at Which