If the economy's short-run aggregate supply curve is upward sloping, a decrease in aggregate demand will cause
A) an increase in the price level and employment.
B) a decrease in the price level and employment.
C) an increase in the price level and a decrease in employment.
D) a decrease in the price level and an increase in employment.

Question

Quizplus · Accepted Answer

If the economy's short-run aggregate supply curve is upward sloping, a decrease in aggregate demand will cause a decrease in both the price level and employment, as there will be a surplus of goods and services that firms will need to decrease prices to sell, and consequently decrease production and employment to reduce costs.

If the Economy's Short-Run Aggregate Supply Curve Is Upward Sloping