If Prices and Wages Are Inflexible Downward, a Decrease in Aggregate

question 219

Multiple Choice

If prices and wages are inflexible downward, a decrease in aggregate demand will

• A)reduce the price level but not real output.
• B)increase short-run aggregate supply.
• C)decrease short-run aggregate supply.
• D)reduce real output but not the price level.

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Definitions:

Business Capacity

The maximum level of output or production that a company can sustain with its current resources and infrastructure.

Sales Units

A measure of the quantity of products sold or services provided over a period of time.

Revenue Expected

The income that a company anticipates receiving from its normal business activities, such as sales of goods or services, during a specific period.

Planned Sales

Forecasted or projected revenue figures based on market analysis, historical data, and anticipated sales activities, important for budgeting and strategic planning.