In the short run, a decrease in aggregate demand will lead to
A)no change in the price level and a decrease in real GDP.
B)a decrease in the price level and an increase in real GDP.
C)an increase in the price level and an increase in real GDP.
D)an increase in the price level and a decrease in real GDP.
E)a decrease in the price level and an increase in the unemployment rate.

Question

Quizplus · Accepted Answer

In the short run, a decrease in aggregate demand typically leads to a lower price level and higher unemployment, as firms produce less due to reduced demand, leading to layoffs.

In the Short Run, a Decrease in Aggregate Demand Will