Question

If Eastland’s consumer confidence rises, what would happen to macroeconomic equilibrium in the short-run if the short-run aggregate supply curve is upward sloping?

AD shifts left, aggregate output decreases, and prices rise.

AD shifts right, aggregate output increases, and prices rise.

AD shifts right, aggregate output increases, and prices fall.

AD shifts left, aggregate output decreases, and prices fall.

Answer 1

Answer: AD shifts right aggregate output increases and prices rise

A rise in customer confidence increases consumption as well as investment thereby shifting the AD to the right if the short run AS curve is upward sloping a new macroeconomic equilibrium at a higher price level and increased output will be reached