There has been a decrease in investment.As a result,real GDP will ________ in the short run,and ________ in the long run.
A)increase; increases further
B)increase; decrease to its initial value
C)decrease; decrease further
D)decrease; increase to its initial level

Question

Quizplus · Accepted Answer

In the short run, a decrease in investment reduces aggregate demand, leading to a decrease in real GDP. In the long run, the economy tends to return to its potential output level due to adjustments in prices and wages, so real GDP increases back to its initial level.

There Has Been a Decrease in Investment