An economy is at a full-employment equilibrium,and then the aggregate demand curve shifts leftward.As a result,the price level ________ and real GDP ________.
A)rises;increases
B)rises;decreases
C)falls;increases
D)falls;decreases
E)falls;does not change

Question

Quizplus · Accepted Answer

When the aggregate demand curve shifts leftward, it means that there is less demand for goods and services in the economy. As a result, firms will reduce production and lay off workers, leading to a decrease in real GDP. In the short run, prices may not adjust quickly enough, leading to a decrease in the price level. Therefore, the correct answer is D) falls; decreases.

An Economy Is at a Full-Employment Equilibrium,and Then the Aggregate