The quantity of real GDP supplied decreases if the price level ________ because it ________ profits.
A)rises;increases
B)rises;decreases
C)falls;increases
D)falls;decreases
E)None of the above answers is correct because the AS curve is vertical so that the quantity of real GDP supplied does not change when the price level changes.

Question

Quizplus · Accepted Answer

As the price level falls, profits decrease. Therefore, firms will decrease the quantity of real GDP supplied since it is less profitable to produce goods and services.

The Quantity of Real GDP Supplied Decreases If the Price