The Short-Run and Long-Run Aggregate Supply Curves Remain Stable, and a Decrease

question 303

Multiple Choice

The short-run and long-run aggregate supply curves remain stable, and a decrease in aggregate demand occurs. What is the result in the short run?

• A) An increase in the price level and real GDP will occur.
• B) A period of expansion and a rise in the unemployment rate could occur.
• C) A period of recession and a rise in the unemployment rate could occur.
• D) The price level will fall but real GDP will remain the same.

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Definitions:

Classical Economists

A group of economists from the 18th and 19th centuries, including figures like Adam Smith and David Ricardo, who focused on the ideas of free markets and economic growth.

Interest Rates

The cost of borrowing money, typically expressed as a percentage of the amount borrowed, that lenders charge borrowers.

Classical Economists

Economists from the 18th and 19th centuries who believed in self-regulating markets and emphasized the importance of supply in determining economic value.

Money

A medium of exchange that facilitates trade, and is widely accepted in payment for goods and services and repayment of debts.