According to classical economists, a reduction in aggregate demand should result in:
A) an increase in the unemployment rate.
B) a reduction in the price level.
C) a decrease in real GDP.
D) all of the above

Question

Quizplus · Accepted Answer

Classical economists believe that prices and wages are flexible, so a reduction in aggregate demand would primarily lead to a decrease in the price level, rather than affecting output or employment significantly.

According to Classical Economists, a Reduction in Aggregate Demand Should