What happens in an economy when aggregate demand decreases?
A) The price level rises, output rises, and an expansion occurs.
B) The price level rises, output falls, and a recession occurs.
C) The price level falls, output rises, and an expansion occurs.
D) The price level falls, output falls, and a recession occurs.

Question

Quizplus · Accepted Answer

When aggregate demand decreases, it typically leads to a lower price level and reduced output as businesses respond to decreased spending by cutting back on production, which can lead to a recession.

What Happens in an Economy When Aggregate Demand Decreases