A decrease in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?
A)The price level will fall,and the level of GDP will be unaffected.
B)The price level will fall,and the level of GDP will fall.
C)The price level will rise,and the level of GDP will fall.
D)The price level will rise,and the level of GDP will be unaffected.

Question

Quizplus · Accepted Answer

In the long run, a decrease in aggregate demand will lead to a lower price level, but the level of GDP will return to its potential output or full employment level, as wages and prices adjust.

A Decrease in Aggregate Demand in the Economy Will Have