If the Economy Is on the Aggregate Supply Curve but to the Right

question 152

Multiple Choice

If the economy is on the aggregate supply curve but to the right of the aggregate demand curve,which of the following will be the first market force to lead the economy toward an equilibrium?

• A) At the current output level,prices will be too low and firms will increase their prices.
• B) At the current price level,output will be too low,inventories will diminish,and firms will increase their production.
• C) At the current output level,prices will be too low and firms will lower their prices.
• D) At the current price level,output will be too high and so prices will drop so that output will drop.
• E) At the current price level,output will be too high,inventories will pile up and firms will cut back on their production.

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Definitions:

THINK Technique

A mindfulness strategy often used to encourage thoughtful responses rather than reactive ones, asking if a statement is True, Helpful, Inspiring, Necessary, and Kind before speaking or acting.

Necessary

A requirement or need for a particular purpose or reason.

THINK Technique

A strategy or process designed to help individuals make thoughtful and informed decisions or reactions, emphasizing thoughtful consideration before acting.

Inspiring

Having the effect of motivating or encouraging someone to do something or to feel a certain way.