When ________, the Price Level Falls, Inventories Increase and Firms

question 250

Multiple Choice

When ________, the price level falls, inventories increase and firms respond by reducing output and employment.

• A) aggregate demand increases
• B) aggregate demand decreases
• C) aggregate supply decreases
• D) aggregate supply increases

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Definitions:

Elastic Demand

A condition where the quantity demanded of a product changes significantly in response to changes in its price.

Expenditures Decline

A situation where the amount of money spent by individuals or entities decreases over a period of time.

Elastic Demand

A scenario where the quantity demanded of a product is highly sensitive to changes in its price.

Quantity Demanded

The total amount of a good or service consumers are willing and able to purchase at a specific price.