Suppose the full employment level of real output
(Q)
for a hypothetical economy is
$540
, the price level (
q
) initially is 120 , and prices and wages are flexible both upward and downward. Refer to the accompanying short-run aggregate supply schedules. If the price level unexpectedly declines from 120 to 95 , the level of real output in the short run will
Multiple Choice
rise from
$480
to
$540
.
fall from
$540
to
$480
.
fall from
$600
in
$540