Assuming an upward-sloping AS curve,if an economy is at full employment and investment spending decreases while all other levels of spending remaining constant,then the price level
A)Increases and output decreases.
B)Decreases and output decreases.
C)Increases and output increases.
D)Decreases and output increases.

Question

Quizplus · Accepted Answer

Since the economy is at full employment, any decrease in investment spending will cause a decrease in aggregate demand. As a result, output will decrease, and since the AS curve is upward-sloping, the price level will also decrease.

Assuming an Upward-Sloping AS Curve,if an Economy Is at Full