The reason for a decrease in aggregate
Explanation of Solution
The Philips curve on the graph represents the inflation and
When there is a decrease in inflation in the economy but a higher rate of unemployment then the aggregate demand in the short-run Philips curve would fall. It happens because even if the prices of goods are low but fewer people are engaged in employment which decreases their level of consumption and therefore the aggregate demand would decrease.
Introduction: An aggregate demand refers to the total demand for goods and services at different price levels (aggregated) in the economy. In simple words, it is the total quantity which is demanded by customers at different prices in the market.
The price level is the average current price of goods and services in the economy that are produced in a particular interval.
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Chapter 34 Solutions
Krugman's Economics For The Ap® Course
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