Because increases in the price level reduce planned aggregate expenditure and short-run equilibrium output,

Question

Quizplus · Accepted Answer

The statement suggests that there is a negative relationship between the price level and planned aggregate expenditure. This means that as the price level increases, fewer goods and services will be demanded, reducing the equilibrium level of output. This is consistent with the downward-sloping aggregate demand curve. The short-run aggregate supply curve, on the other hand, is upward-sloping due to diminishing marginal returns in production.

Because Increases in the Price Level Reduce Planned Aggregate Expenditure