Assuming an economy starts in long-run equilibrium, if the aggregate demand curve were to decrease:
A) prices in the economy would increase.
B) output in the economy would increase.
C) the short-run aggregate supply curve would shift left.
D) the long-run effect would be a lower price level.

Question

Quizplus · Accepted Answer

In the long run, a decrease in aggregate demand leads to a lower price level as the economy adjusts back to full employment output, assuming flexible prices and wages.

Assuming an Economy Starts in Long-Run Equilibrium, If the Aggregate