ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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output and prices rise.
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output rise and prices fall.
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output fall and prices rise.
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output and prices fall.
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Detailed explanation-1: -short-run aggregate supply shifts right would cause prices to fall and output to rise in the short run. The aggregate supply curve slopes upwards owing to the direct relationship between aggregate supply and price level.
Detailed explanation-2: -The SRAS curve shows that a higher price level leads to more output. There are two important things to note about SRAS. For one, it represents a short-run relationship between price level and output supplied. Aggregate supply slopes up in the short-run because at least one price is inflexible.
Detailed explanation-3: -The short run aggregate supply curve is an upward sloping curve that depicts the number of goods and services produced at each price level in the economy. Increasing the price level causes a movement along the short run aggregate supply curve, leading to higher output and higher employment.
Detailed explanation-4: -An increase in aggregate demand in the short-run aggregate market results in an increase in the price level and an increase in real production. The level of real production resulting from the shock can be greater or less than full-employment real production.