Scenario 14-2 The Economy Is in Long-Run Equilibrium. Suddenly, Due to Corporate

question 218

Multiple Choice

Scenario 14-2
The economy is in long-run equilibrium. Suddenly, due to corporate scandals, a recession experienced by a major trading partner, and the loss of confidence among policymakers, citizens become pessimistic concerning the future. They maintain this level of pessimism for a long time.
-Refer to the Scenario 14-2. In the short-run, which statement is consistent with the aggregate demand and aggregate supply theory?

• A) The price level and real GDP both increase.
• B) The price level and real GDP both decrease.
• C) The price level rises, and real GDP falls
• D) The price level falls, and real GDP rises.

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