In the long run, a decrease in aggregate demand will lead to a(n) _____
A) decrease in the price and output levels.
B) increase in the price and output levels.
C) increase in the price level and a decrease in the output level.
D) decrease in the price level and an increase in the output level.
E) decrease in the price level and no change in the output level.

Question

Quizplus · Accepted Answer

In the long run, the economy is expected to return to its potential output level, so a decrease in aggregate demand will lower the price level but not affect the output level.

In the Long Run, a Decrease in Aggregate Demand Will