In the short run, what happens to the economy when consumer spending decreases in the AD and SRAS model?

Question

Quizplus · Accepted Answer

When consumer spending decreases in the AD and SRAS model, it leads to a decrease in aggregate demand (AD) and a decrease in output and prices in the short run. This is known as a recessionary gap, where the economy operates below its potential output. Since prices decrease due to the decrease in consumer spending, inflation is lower. The real growth rate is also lower because the output decreases.

In the Short Run, What Happens to the Economy When