Suppose the Full Employment Level of Real Output (Q) for a Hypothetical

question 220

Multiple Choice

Suppose the full employment level of real output (Q) for a hypothetical economy is $500, the price level (P) initially is 100, and prices and wages are flexible both upward and downward. Refer to the
Accompanying short-run aggregate supply schedules. In the long run, a fall in the price level from
100 to 75 will

• A) decrease real output from $500 to $440.
• B) increase real output from $500 to $620.
• C) change the aggregate supply schedule from (a) to (c) and produce an equilibrium level of real output of $500.
• D) change the aggregate supply schedule from (a) to (b) and produce an equilibrium level of real output of $500.