A Decrease in Aggregate Demand in the Economy Will Have

question 165

Multiple Choice

A decrease in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

• A)The price level will fall, and the level of GDP will be unaffected.
• B)The price level will fall, and the level of GDP will fall.
• C)The price level will rise, and the level of GDP will fall.
• D)The price level will rise, and the level of GDP will be unaffected.
• E)The price level will fall, and the long-run level of GDP will become more sensitive to changes in the price level.

---

Definitions:

Market-Price Transfer

The practice of setting the price for goods or services sold between divisions within the same company based on the current market price.

Variable Cost

Costs that vary directly with the level of production or sales volume.

External Suppliers

Third-party entities that provide goods or services to a company, but are not part of the company itself.

Annual Capacity

The total output a company can produce in a year using its resources efficiently.