Assuming the short-run aggregate supply curve is upward-sloping, a decrease in aggregate demand (while short-run aggregate supply remains unchanged)results in a lower price level, lower output (real GDP), and higher unemployment.
What do you mean by aggregate demand?
- The entire quantity of demand for all completed products and services produced in an economy is measured by aggregate demand.
- The entire amount of money spent on those products and services at a certain price point and period is referred to as aggregate demand.
- Lowering income taxes will leave the government with less money for government expenditure, which will reduce aggregate demand and balance out the rise in consumer spending.
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