What is impact of decrease in aggregate supply on price level and real GDP?
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The intuition behind the real wealth effect is that when the price level decreases, it takes less money to buy goods and services. The money you have is now worth more and you feel wealthier. So, in response to a decrease in the price level, real GDP will increase.
GDP - 'Gross Domestic Product'
Definition: GDP is the final value of the goods and services produced within the geographic boundaries of a country during a specified period of time, normally a year. GDP growth rate is an important indicator of the economic performance of a country.
INTUITION- intuition is the ability to understand or make sense of something without conscious reasoning.
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