In the long run,aggregate demand is ________ for determining real GDP,and the "paradox of thrift" ________.
A)not important; applies
B)not important; does not apply
C)the only influence; applies
D)the most important influence; does not apply
E)stable and important; applies

Question

Quizplus · Accepted Answer

In the long run, aggregate demand does not determine real GDP because the economy tends to adjust to its potential output through price and wage changes. The "paradox of thrift," which suggests that increased saving can lead to a decrease in aggregate demand, thereby reducing income and savings, does not apply in the long run as the economy adjusts to its full-employment output.

In the Long Run,aggregate Demand Is ________ for Determining Real