If an economy is in equilibrium at a given price level and a given output level,the aggregate demand/aggregate supply (AD/AS)model indicates that an unanticipated decrease in aggregate demand will cause
A)real output to decline.
B)the price level to fall.
C)unemployment to increase.
D)all of the above.

Question

Quizplus · Accepted Answer

According to the AD/AS model, an unanticipated decrease in aggregate demand will shift the AD curve to the left, leading to a decrease in both real output and the price level. This decrease in output can lead to an increase in unemployment. Therefore, all of the above choices are correct.

If an Economy Is in Equilibrium at a Given Price