At a price level of 105, firms are unable to _______.     A. meet the demand for their output, so they increase production and raise prices   B. sell their output, so they cut production and aggregate supply decreases   C. meet the demand for their output, so they increase production and aggregate supply increases   D. sell their output, so they cut production and lower prices

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At a price level of 105, firms are unable to _______.
 
 
A.
meet the demand for their output, so they increase production and raise prices
 
B.
sell their output, so they cut production and aggregate supply decreases
 
C.
meet the demand for their output, so they increase production and aggregate supply increases
 
D.
sell their output, so they cut production and lower prices
In Japan, potential GDP is 600 trillion yen, and the table shows the aggregate
demand and aggregate supply schedules.
Price level
75
85
95
105
115
Real GDP
Real GDP
demanded
supplied
(trillions of 2009 yen)
600
550
500
450
400
400
450
500
550
650
Suppose the price level is 105. Describe the situation and explain how firms
respond.
Transcribed Image Text:In Japan, potential GDP is 600 trillion yen, and the table shows the aggregate demand and aggregate supply schedules. Price level 75 85 95 105 115 Real GDP Real GDP demanded supplied (trillions of 2009 yen) 600 550 500 450 400 400 450 500 550 650 Suppose the price level is 105. Describe the situation and explain how firms respond.
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