The reduction in aggregate demand would:
A) slow the economy down and increase the rate of inflation.
B) speed the economy up keeping the rate of inflation unchanged.
C) slow the economy down and reduce the rate of inflation.
D) speed the economy up and reduce the rate of inflation.

Question

Quizplus · Accepted Answer

A reduction in aggregate demand means that there will be less spending in the economy, which will slow down economic activity. This decrease in spending will also lead to a decrease in demand for goods and services, which will put downward pressure on prices and reduce the rate of inflation. Therefore, choice C is the best answer.

The Reduction in Aggregate Demand Would