In the aggregate demand-aggregate supply model, a decrease in the expected price level, everything else remaining unchanged, causes _____to_____ in the short run.
A)output; increase
B)output; decline
C)output; remain unchanged
D)inflation; increase

Question

Quizplus · Accepted Answer

A decrease in expected price level will shift the aggregate demand curve to the right, increasing output (GDP) in the short run as firms will produce more due to the increase in demand for their products.

In the Aggregate Demand-Aggregate Supply Model, a Decrease in the Expected