Suppose an Economic Contraction Occurs, Due to a Shift in Aggregate

question 50

Multiple Choice

Suppose an economic contraction occurs, due to a shift in aggregate demand.How will prices change, assuming no government intervention?  

• A) Prices will rise in the short run, and rise even more in the long run. 
• B) Prices will rise in the short run, and fall back to their original level in the long run. 
• C) Prices will fall in the short run, and fall even more in the long run. 
• D) Prices will fall in the short run, and rise back to their original level in the long run.

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Definitions:

Parol Evidence Rule

A legal principle in contract law that prevents parties from modifying a written contract using oral or implied agreements not included in the original document.

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