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Assume an Economy That Is Currently at the Full-Employment Level

Question 29

Multiple Choice

Assume an economy that is currently at the full-employment level of output.If aggregate demand decreases, what should we expect in the median run?


A) a decrease in potential GDP and the price level
B) an increase in unemployment and the price level
C) a decrease in unemployment and the price level
D) an increase in unemployment and a decrease in the price level
E) a decrease in potential GDP and an increase in unemployment

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