Final answer:
A decrease in the costs of production, such as petroleum and electricity, causes the aggregate supply curve to shift right, leading to lower price levels, higher output, and lower unemployment in the new equilibrium of the AD/AS model.
Step-by-step explanation:
When firms experience a decrease in the costs of production due to lower petroleum prices and electricity bills, the aggregate supply (AS) curve in the AD/AS (aggregate demand/aggregate supply) model shifts to the right. This movement indicates that, at every price level, producers can supply a greater quantity of real GDP. As a result of this shift, the new equilibrium in the economy will encompass a lower price level and higher income/output, leading to lower inflation, higher output, and eventually lower unemployment rates. If the AD curve remains unchanged, the intersection of AD and AS curves will show that the economy has adjusted to a point where it can offer more goods and services at a lower price, all else being equal.