Use the following graph to answer the next six questions. This graph depicts an economy where aggregate demand has decreased, with no change in either short-run aggregate supply (SRAS) or long-run aggregate supply (LRAS).

-During the Great Depression,the aggregate price level fell by 20% as depicted in the graph,suggesting that:

Question

Use the following graph to answer the next six questions. This graph depicts an economy where aggregate demand has decreased, with no change in either short-run aggregate supply (SRAS) or long-run aggregate supply (LRAS).
 
-During the Great Depression,the aggregate price level fell by 20% as depicted in the graph,suggesting that:

Quizplus · Accepted Answer

The graph shows that there was a decrease in aggregate demand but no change in either short-run or long-run aggregate supply. The fact that the aggregate price level fell by 20% during the Great Depression suggests that the primary cause was a decrease in aggregate demand. Option A is not correct because there was no change in long-run aggregate supply. Option C is incorrect because long-run aggregate supply actually decreased, as suggested by the downward sloping LRAS curve. Option D is incorrect because short-run aggregate supply remained constant. Option E is incorrect because it suggests that long-run aggregate supply increased, which is not supported by the graph.

Use the Following Graph to Answer the Next Six Questions