Using Figure 1 above, if the aggregate demand curve shifts from AD3 to AD2 the result in the short run would be:
A) P1 and Y2.
B) P3 and Y1.
C) P2 and Y3.
D) P2 and Y1.

Question

Using Figure 1 above, if the aggregate demand curve shifts from AD3 to AD2 the result in the short run would be: 
A) P1 and Y2. 
B) P3 and Y1. 
C) P2 and Y3. 
D) P2 and Y1.

Quizplus · Accepted Answer

The shift in aggregate demand from AD3 to AD2 would lead to a decrease in both price level and output in the short run. Therefore, the correct choice is D, which corresponds to a decrease in price level (from P3 to P2) and a decrease in output (from Y2 to Y1).

Using Figure 1 Above, If the Aggregate Demand Curve Shifts