A decrease in aggregate demand will cause a greater decline in real output the
A)less flexible is the economy's price level.
B)more flexible is the economy's price level.
C)steeper is the economy's AS curve.
D)larger is the economy's marginal propensity to save.

Question

Quizplus · Accepted Answer

If the economy's price level is less flexible, it means prices do not adjust easily to changes in demand, leading to a larger impact on real output when aggregate demand decreases.

A Decrease in Aggregate Demand Will Cause a Greater Decline