Use the pair of diagrams below to answer the following questions.
Figure 35-1

-Refer to Figure 35-1.If the economy starts at c and 1,then in the short run,a decrease in aggregate demand moves the economy to

Question

Use the pair of diagrams below to answer the following questions.
Figure 35-1
 
-Refer to Figure 35-1.If the economy starts at c and 1,then in the short run,a decrease in aggregate demand moves the economy to

Quizplus · Accepted Answer

An decrease in aggregate demand will cause a shift to the left in the aggregate demand curve, moving the economy from point c to point d. In the short run, due to sticky prices and wages, output will decrease and the economy will move down from point 1 to point 3. This is represented by the movement from c-1 to d-3 in the diagram. Choice B is the only option that matches this movement.

Use the Pair of Diagrams Below to Answer the Following