eCourses PRAIRIE VIEW A+M HELP all2017 ECON2123P03-1810-13518 lome I My courses

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eCourses PRAIRIE VIEW A+M HELP all2017 ECON2123P03-1810-13518 lome I My courses ECON2123P03-1810-13518 / Week 10: Nov 6-10/ 2123 AD & AS Bonus Point Qui Question 2 In the AD &AS; Model of an economy, a decrease in aggregate demand causes Not yet answered Points out of 1 Y Flag Select one: a. Unemployment to fall and inflation to fall b. Unemployment to fall and inflation to rise c. Unemployment to rise and inflation to fall. d. Unemployment to rise and inflation to rise question Previous page

Explanation / Answer

Solution:

C) Unemployment will rise and inflation will fall.

The AD-AS model shows how the components - GDP and Price level changes due to changes in aggregate demand and supply.When the government spending decreases or consumer spending decreases, aggregate demand decreases.This causes an increase in unemployment . On the other hand due to decrease in aggregate demand, there is an excess of aggregate supply, which leads to an overall decrease in price level.

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