Using the Aggregate Demand-Aggregate Supply Model, Predict What Happens in the Short

Multiple Choice

Using the aggregate demand-aggregate supply model, predict what happens in the short run if an increase in health insurance premiums paid by firms raises the cost of employing each worker.

A) The aggregate supply curve shifts right; the aggregate demand curve is not affected; price level decreases; real GDP increases.
B) The aggregate demand curve shifts right; the aggregate supply curve is not affected; price level and real GDP increase.
C) The aggregate demand curve shifts left; the aggregate supply curve is not affected; price level and real GDP decrease.
D) The aggregate supply curve shifts left; the aggregate demand curve is not affected; price level increases; real GDP decreases.