Figure 13-6 shows the short-run macroeconomic equilibrium of an economy. Which of the following will happen in the short run if there is a decrease in aggregate demand?Figure 13-6
A)The creation of an inflationary gap
B)The creation of a recessionary gap
C)The restoration of the economy to its long-run equilibrium
D)An increase in the aggregate price level
E)An increase in the level of unemployment

Question

Figure 13-6 shows the short-run macroeconomic equilibrium of an economy. Which of the following will happen in the short run if there is a decrease in aggregate demand?Figure 13-6 
A)The creation of an inflationary gap 
B)The creation of a recessionary gap 
C)The restoration of the economy to its long-run equilibrium 
D)An increase in the aggregate price level 
E)An increase in the level of unemployment

Quizplus · Accepted Answer

A decrease in aggregate demand will shift the AD curve to the left, causing a decrease in real output and an increase in the unemployment rate. This will result in a recessionary gap where the economy is producing below its potential output.

Figure 13-6 Shows the Short-Run Macroeconomic Equilibrium of an Economy