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

Question

Quizplus · Accepted Answer

In the short run, a decrease in aggregate demand typically results in a lower price level and higher unemployment due to reduced production, as businesses adjust to decreased demand for goods and services.

In the Short Run, a Decrease in Aggregate Demand Will