A decrease in aggregate demand is harmful in the short run because ________,but beneficial in the long run because ________.
A) real wealth rises; real wealth falls
B) wages increase; wages decrease
C) the price level rises; output falls
D) unemployment rises; the price level falls
E) the price level falls; the unemployment rate rises

Question

Quizplus · Accepted Answer

In the short run, a decrease in aggregate demand leads to higher unemployment as firms produce less. In the long run, it can lead to a lower price level, which can be beneficial as it may restore purchasing power.

A Decrease in Aggregate Demand Is Harmful in the Short