AP Macroeconomics Question 258: Answer and Explanation
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1. If the economy is in disequilibrium where the price level is such that the aggregate quantity of products demanded exceeds the aggregate quantity of products supplied, then
- A. prices will be driven upward to restore equilibrium.
- B. supply will increase.
- C. demand will decrease.
- D. supply will decrease.
- E. a recession is inevitable.
Correct Answer: A
(A) If the price level in the economy is below the equilibrium price level, then the quantity of products demanded will exceed the quantity supplied. There will be a shortage, and shortages drive prices up.