The price level falls if
A) aggregate demand increases more rapidly than aggregate supply.
B) aggregate demand increases more slowly than aggregate supply.
C) aggregate demand increases and aggregate supply does not change.
D) neither aggregate demand nor aggregate supply change.

Question

Quizplus · Accepted Answer

When aggregate demand increases more slowly than aggregate supply, it means that the supply of goods and services in the economy is growing faster than the demand for them. This excess supply puts downward pressure on prices, leading to a fall in the price level.

The Price Level Falls If