If aggregate demand decreases and neither short-run nor long-run aggregate supply changes, then
A) the price level increases in the short-run and decreases in the long run.
B) there is an inflationary gap.
C) there is a recessionary gap.
D) in the long run, the long-run aggregate supply will decrease.

Question

Quizplus · Accepted Answer

When aggregate demand decreases and aggregate supply remains unchanged, it typically leads to a recessionary gap. This is because the decrease in demand leads to lower production, employment, and income levels, without a corresponding decrease in the capacity to supply goods and services.

If Aggregate Demand Decreases and Neither Short-Run nor Long-Run Aggregate