When Aggregate Demand Shifts Left Along the Short-Run Aggregate Supply

question 37

Multiple Choice

When aggregate demand shifts left along the short-run aggregate supply curve,

• A)unemployment and prices rise.
• B)unemployment rises and prices fall.
• C)unemployment falls and prices rise.
• D)unemployment and prices fall.

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Definitions:

Allocative Efficiency

A state of resource allocation where goods and services are distributed according to consumer preferences in a way that maximizes utility.

External Benefits

Advantages that result from a product or service's use that affect someone other than the direct consumer or producer, often justifying government intervention.

Consumption

The process by which goods and services are used by households and individuals, leading to a decrease in their availability.

Negative Externalities

Negative effects or costs that are incurred by third parties as a result of economic activities, for which they are not compensated, such as pollution.