Which of the Following Would Cause the Price Level to Fall

question 15

Multiple Choice

Which of the following would cause the price level to fall and output to rise in the short run?

• A)an increase in the money supply
• B)a decrease in the money supply
• C)an adverse supply shock
• D)a favorable supply shock

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Definitions:

Short-Run Economic Fluctuations

Variations in the pace of economic activity, typically characterized by changes in GDP, unemployment, and other indicators, happening over a short period.

John Maynard Keynes

A British economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments, known for advocating increased government expenditures and lower taxes to stimulate demand and pull the global economy out of depression.

Aggregate Demand

Aggregate ask for products and services within an economy, designated at a particular all-encompassing price level throughout a specified interval.

Unemployment

Unemployment is the situation where individuals who are capable of working and are actively seeking employment are unable to find a job.