For a fixed aggregate supply curve,decreases in aggregate demand increase real GDP.

Question

Quizplus · Accepted Answer

According to the model of the AD-AS (Aggregate Demand-Aggregate Supply) framework, a decrease in aggregate demand would cause a contraction in real GDP at the short-run equilibrium point, as there would be a decrease in the demand for goods and services, which could lead to a decrease in output and employment. A fixed aggregate supply curve, in this case, would not affect this result, as it does not determine the level of output, but only the price level at which goods and services are sold.

For a Fixed Aggregate Supply Curve,decreases in Aggregate Demand Increase