When aggregate demand decreases, what happens to prices and employment?
A) Prices will fall and unemployment will rise.
B) Prices and unemployment fall.
C) Prices and unemployment rise.
D) Prices will rise and unemployment will fall.

Question

Quizplus · Accepted Answer

When aggregate demand decreases, there is less demand for goods and services. As a result, prices will fall because there is less competition for purchases. However, companies will also produce less to meet the lower demand, which leads to a decrease in employment opportunities and ultimately, an increase in unemployment.

When Aggregate Demand Decreases, What Happens to Prices and Employment