Question

An economy starts out in short-run and long-run equilibrium. If both short-run

and long-run aggregate supply decrease, so that the economy remains in
equilibrium:

Answer 1

If both short-run and long-run aggregate supply decrease, so that the economy remains in equilibrium, the real level of output will fall, and the price level will rise.

Answer; Option (D), i.e., the real level of output will fall, and the price level will rise.

Step-by-step explanation: