Assume that (a) the price level is flexible upward but not downward and (b) the economy i
Assume that (a) the price level is flexible upward but not downward and (b) the economy is currently operating at its full-employment output. Other things equal, how will each of the following affect the equilibrium price level and equilibrium level of real output in the short run?
a. An increase in aggregate demand.
b. A decrease in aggregate supply, with no change in aggregate demand.
c. Equal increases in aggregate demand and aggregate supply.
d. A decrease in aggregate demand.
e. An increase in aggregate demand that exceeds an increase in aggregate supply.
9. True or False: If the price of oil suddenly increases by a large amount, AS will shift left, but the price level will not rise thanks to price inflexibility.