An economy is at a full-employment equilibrium, and then the aggregate demand curve shifts leftward. As a result, the price level ________ and real GDP ________.
A) falls; increases
B) falls; does not change
C) falls; decreases
D) rises; decreases
E) rises; increases

Question

Quizplus · Accepted Answer

When the aggregate demand curve shifts leftward, it indicates a decrease in the total demand for goods and services in an economy. This leads to a decrease in the price level as suppliers lower prices to encourage consumption. Additionally, real GDP decreases because there is less demand for goods and services, leading to reduced production.

An Economy Is at a Full-Employment Equilibrium, and Then the Aggregate