In the long run, a decrease in aggregate demand, all other things unchanged, will cause the price level to
A) increase and potential output to increase.
B) decrease and potential output to decrease.
C) increase and potential output to remain stable.
D) decrease and potential output to remain stable.

Question

Quizplus · Accepted Answer

In the long run, a decrease in aggregate demand will lead to a lower price level, but potential output, which is determined by factors such as technology and resources, remains stable.

In the Long Run, a Decrease in Aggregate Demand, All