If both Real GDP and the general price level fell following the September 11^th terrorist attack,

Question

Quizplus · Accepted Answer

When both Real GDP and the general price level fall, it indicates that the negative aggregate demand shock was larger than the negative aggregate supply shock. This is because a dominant negative demand shock leads to a decrease in both output (Real GDP) and prices, whereas a dominant negative supply shock would typically increase prices due to reduced supply, even as output falls.

If Both Real GDP and the General Price Level Fell