On average, the greater the unexpected decline in aggregate demand
A) the weaker is the resulting deflation.
B) the greater is the resulting deflation.
C) the greater is the resulting inflation.
D) the greater is the rise in the price level.

Question

Quizplus · Accepted Answer

A significant unexpected decline in aggregate demand results in a decrease in overall demand for goods and services. As a result, businesses may lower their prices to maintain sales, leading to deflation. The greater the decline in aggregate demand, the greater the pressure on businesses to reduce their prices to attract consumers, resulting in a greater deflationary effect.

On Average, the Greater the Unexpected Decline in Aggregate Demand