How Does an Economic Contraction That Is Caused by a Shift

question 95

Multiple Choice

How does an economic contraction that is caused by a shift in aggregate demand remedy itself over time?

• A) The expected price level rises, shifting aggregate demand right.
• B) The expected price level rises, shifting aggregate demand left.
• C) The expected price level falls, shifting aggregate supply right.
• D) The expected price level falls, shifting aggregate supply left.

---

Definitions:

Short-Run Supply Curve

A graphical representation showing the relationship between the market price of a good and the quantity supplied by producers in the short term.

Optimal Output

The level of production that maximizes a company's profits or minimizes its costs, taking into account demand and production capacity.

Market Price

The present cost at which a product or service may be purchased or sold, dictated by market demand and supply.

Optimal Short-Run Output

The level of production that maximizes a firm's short-term profits, given its existing constraints.