Suppose we are at the natural real GDP when the aggregate demand curve suddenly shifts downward.In Classical macroeconomics,the price level would ________,and real output would ________.
A)remain unchanged,also remain unchanged
B)remain unchanged,fall below natural real GDP until the aggregate demand curve shifts back up
C)fall,fall briefly then return to natural real GDP
D)fall,fall below natural real GDP until the aggregate demand curve shifts back up

Question

Quizplus · Accepted Answer

In Classical macroeconomics, a downward shift in the aggregate demand curve would initially cause both the price level and real output to fall. However, according to Classical theory, the economy self-adjusts through changes in wages and prices, leading real output to return to its natural level (natural real GDP) over time.

Suppose We Are at the Natural Real GDP When the Aggregate