Answer to Question #243160 in Macroeconomics for pearl

Question

A country experiences a decrease in the price level and a rise in real output. What combination of the changes in aggregate demand and supply would generate this outcome?

Group of answer choices

An increase in aggregate supply but no change in aggregate demand.

A decrease in aggregate demand but no change in aggregate supply.

A decrease in aggregate supply.

A decrease in both aggregate demand and aggregate supply.

Answer 1

The correct answer to the question is choice

A. An increase in aggregate supply but no change in aggregate demand.

Explanation

An increase in the production level shifts the supply curve to the right side since, under favourable conditions, firms can produce large quantities of output at every price level. This results in greater levels of Gross Domestic Product and downward pressure on the level of price when aggregate demand is constant.