ear Real GDP in ngultrum (local currency) Inflation rate 2011 38.19 billion 3.43
ID: 1227833 • Letter: E
Question
ear
Real GDP
in ngultrum
(local currency)
Inflation rate
2011
38.19 billion
3.43%
2012
37.54 billion
7.14%
Table 2: Data for Bhutan
The likely source of this economic change (from 2011 to 2012) is
A.
a decrease in the aggregate supply curve because real GDP decreased and inflation increased,
B.
an increase of the aggregate demand curve because real GDP decreased and inflation increased.
C.
an increase in the aggregate supply curve because real GDP decreased and inflation increased.
D.
a decrease in the aggregate demand curve because real GDP decreased and inflation increased.
ear
Real GDP
in ngultrum
(local currency)
Inflation rate
2011
38.19 billion
3.43%
2012
37.54 billion
7.14%
Explanation / Answer
The correct choice is A
Explanation : - A decrease in Aggregate Supply increases the price level and decreases Real GDP. This is the worst of all possible situations - a higher price level i.e inflation , lower output i.e GDP decreased and higher unemployment .
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