Scenario 14-2 The Economy Is in Long-Run Equilibrium. Suddenly, Due to Corporate

Multiple Choice

Scenario 14-2
The economy is in long-run equilibrium. Suddenly, due to corporate scandals, a recession experienced by a major trading partner, and the loss of confidence among policymakers, citizens become pessimistic concerning the future. They maintain this level of pessimism for a long time.
-Refer to the Scenario 14-2. In the short-run, which statement is consistent with the aggregate demand and aggregate supply theory?

A) The price level and real GDP both increase.
B) The price level and real GDP both decrease.
C) The price level rises, and real GDP falls
D) The price level falls, and real GDP rises.