Figure 15-3
-In Figure 15-3,if the economy is initially at equilibrium at point A,an unanticipated reduction in aggregate demand from A D₁ to A D₂ would cause,in the short run,
A)the price level to fall from P₁ to P₂,real GDP to fall from Q₁ to Q₂,and the rate of unemployment to increase.
B)the price level to move from P₁ to P₂,but real GDP would stay at Q₁.
C)the price level to fall by some amount less than P₁ but greater than P₂,and the rate of unemployment would decrease.
D)no change in either the price level or real GDP,but a decrease in unemployment.

Question

Figure 15-3 
-In Figure 15-3,if the economy is initially at equilibrium at point A,an unanticipated reduction in aggregate demand from A D₁ to A D₂ would cause,in the short run,
A)the price level to fall from P₁ to P₂,real GDP to fall from Q₁ to Q₂,and the rate of unemployment to increase. 
B)the price level to move from P₁ to P₂,but real GDP would stay at Q₁. 
C)the price level to fall by some amount less than P₁ but greater than P₂,and the rate of unemployment would decrease. 
D)no change in either the price level or real GDP,but a decrease in unemployment.

Quizplus · Accepted Answer

An unanticipated reduction in aggregate demand shifts the AD curve from AD₁ to AD₂, causing a decrease in both the price level (from P₁ to P₂) and real GDP (from Q₁ to Q₂) in the short run. This decrease in real GDP implies a decrease in employment, resulting in an increase in the rate of unemployment. Therefore, option A is the correct choice. Option B is incorrect because a decrease in AD would cause a decrease in real GDP. Option C is incorrect because a decrease in AD would cause a decrease in the price level, and an increase in the rate of unemployment. Option D is incorrect because a decrease in AD would cause a decrease in both the price level and real GDP, and a consequent increase in the rate of unemployment.

Figure 15-3 -In Figure 15-3,if the Economy Is Initially at Equilibrium at at Equilibrium