A deep recession hits the world economy,and real GDP in the rest of the world decreases.In the United States,
A)aggregate supply and aggregate demand both increase,and the price level rises.
B)aggregate supply decreases while aggregate demand does not change,and the price level rises.
C)aggregate demand decreases while aggregate supply does not change,and the price level falls.
D)aggregate supply increases and aggregate demand decreases,so the effect on the price level is uncertain.
E)aggregate supply and aggregate demand both decrease,and the price level rises.

Question

Quizplus · Accepted Answer

A deep recession in the world economy would lead to a decrease in demand for U.S. exports, causing a decrease in aggregate demand in the United States. Aggregate supply would not be directly affected by the recession abroad, leading to a fall in the price level.

A Deep Recession Hits the World Economy,and Real GDP in the Rest