In the Short Run, If Prices Were Below Equilibrium

question 128

Multiple Choice

In the short run, if prices were below equilibrium,

• A) excess aggregate demand for goods and services would place downward pressure on prices.
• B) excess aggregate supply of goods and services would place downward pressure on prices.
• C) excess aggregate demand for goods and services would place upward pressure on prices.
• D) excess aggregate supply of goods and services would place upward pressure on prices.

---

Definitions:

Savings

Money that is set aside from income not used for consumption, which may be stored for future expenses, investments, or emergencies.

Capital Stock

The total amount of physical and financial assets owned by a company or country, including buildings, machinery, and equity investments.

Net Investment

The amount of investment in new capital (such as equipment, buildings, and inventory) minus depreciation of existing capital.

Depreciation

A reduction in the value of an asset over time, due to wear and tear, age, or obsolescence.