Data for UK real GDP $35 billion $38 billion inflation rate 5% 3% Year 2011 2012

Question

Data for UK real GDP $35 billion $38 billion inflation rate 5% 3% Year 2011 2012 Refer to Table 2. The likely source of this economic change is O A) an increase in the aggregate supply curve because real GDP increased and infation decreased. B) a decrease in the aggregate supply curve because real GDP increased and inflation decreased. O C) an increase in the aggregate demand curve because real GDP increased and inflation decreased. D) a decrease in the aggregate demand curve because real GDP increased and inflation decreased. Save

Explanation / Answer

A. Ad curve is downward sloping while aggregate supply curve is upward sloping between price level and real GDP. An increase in aggregate supply will shift As curve to right. The New equilibrium output will be more while Price will fall.

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