Asksia AI LOGO

Sia

Question
Statistics
Posted 8 months ago

Which of the following options best describes what would lead to a higher price level?

Choose 1 answer:
(A) A decrease in aggregate demand (AD) only
(B) A decrease in short-run aggregate supply (SRAS) only
(C) A increase in aggregate demand (AD) only
(D) An increase in aggregate demand (AD) or a decrease in short-run aggregate supply (SRAS)
(E) A decrease in aggregate demand (AD) or an increase in short-run aggregate supply (SRAS)
Sign in to unlock the answer
Answer from Sia
Posted 8 months ago
Solution by Steps
step 1
To understand the impact on the price level, we need to consider the effects of changes in aggregate demand (AD) and short-run aggregate supply (SRAS) on the price level
step 2
A decrease in AD would typically lead to a lower price level, as less demand for goods and services tends to push prices down. This is represented by a leftward shift of the AD curve in the AD-SRAS model
step 3
An increase in AD would typically lead to a higher price level, as more demand for goods and services tends to push prices up. This is represented by a rightward shift of the AD curve in the AD-SRAS model
step 4
A decrease in SRAS would typically lead to a higher price level, as less supply of goods and services with unchanged demand tends to push prices up. This is represented by a leftward shift of the SRAS curve in the AD-SRAS model
step 5
An increase in SRAS would typically lead to a lower price level, as more supply of goods and services with unchanged demand tends to push prices down. This is represented by a rightward shift of the SRAS curve in the AD-SRAS model
step 6
Based on steps 2-5, the options that would lead to a higher price level are an increase in AD or a decrease in SRAS
Answer
D
Key Concept
Price Level and Aggregate Demand/Supply
Explanation
A higher price level is caused by either an increase in aggregate demand or a decrease in short-run aggregate supply.

Not the question you are looking for? Ask here!

Enter question by text

Enter question by image

Unlock Smarter Learning with AskSia Super!

Join Super, our all-in-one AI solution that can greatly improve your learning efficiency.

30% higher accuracy than GPT-4o
Entire learning journey support
The most student-friendly features
Study Other Question