Refer to the information provided in Figure 15.2 below to answer the questions that follow. Figure 15.2
-Refer to Figure 15.2.If the economy is currently at Point B and policy makers implement a policy which decreases the aggregate demand curve to AD1,
A)the price level will rise.
B)the price level will fall.
C)GDP will rise.
D)the inflation rate will rise.

Question

Refer to the information provided in Figure 15.2 below to answer the questions that follow.  Figure 15.2
-Refer to Figure 15.2.If the economy is currently at Point B and policy makers implement a policy which decreases the aggregate demand curve to AD1,
A)the price level will rise. 
B)the price level will fall. 
C)GDP will rise. 
D)the inflation rate will rise.

Quizplus · Accepted Answer

When the aggregate demand curve shifts to the left from AD to AD1, the price level will fall from P2 to P1, while the real GDP will remain constant at Y. Therefore, Option A and Option C are incorrect. There is no information provided in the graph to determine the inflation rate, making Option D incorrect.

Refer to the Information Provided in Figure 15