If aggregate demand decreases, and, as a result, real output and employment decline but the price level remains unchanged, it is most likely that
A)the money supply has declined.
B)the price level is inflexible downward and a recession has occurred.
C)cost-push inflation has occurred.
D)productivity has declined.

Question

Quizplus · Accepted Answer

The scenario describes a situation where prices do not fall despite a decrease in demand, indicating price inflexibility, which is common during a recession.

If Aggregate Demand Decreases, And, as a Result, Real Output