Consider the AD/AS Model After Factor Prices Have Fully Adjusted

question 56

Multiple Choice

Consider the AD/AS model after factor prices have fully adjusted to output gaps.A reduction in the level of potential output,with aggregate demand constant,will

• A)leave real output unaffected and increase the price level.
• B)decrease real output and decrease the price level.
• C)decrease real output and leave the price level unchanged.
• D)decrease real output and increase the price level.
• E)increase real output and decrease the price level.

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