Question

PART ONE

With regard to the long-run model of aggregate supply (LRAS), an increase in the price level will lead to:

A. uncertain

B. lower levels of aggregate supply

C. higher levels of aggregate supply

D. no change in aggregate supply

PART TWO: With regard to the short-run model of aggregate demand (AD) and aggregate supply (AS), a wave of pessimism causing a reduction in aggregate demand will lead to:

A) higher equilibrium prices and higher erequilibrium output

B) lower equilibrium prices and higher equilibrium output

C) lower equilibrium prices and lower equilibrium output

D)higher equilibrium prices and lower equilibrium output