A decrease in aggregate demand, all other things unchanged, in the long run will generate
A) an increase in potential output and no change in the price level.
B) a decrease in potential output and no change in the price level.
C) no change in potential output and an increase in the price level.
D) no change in potential output and a decrease in the price level.

Question

Quizplus · Accepted Answer

In the long run, a decrease in aggregate demand leads to a lower price level, but potential output remains unchanged as it is determined by factors like technology and resources, not by demand.

A Decrease in Aggregate Demand, All Other Things Unchanged, in the Long