Multiple Choice
The reduction in aggregate demand caused by deflation:
A) further reduces prices, causing a deflationary spiral.
B) decreases production and raises prices back to their original level.
C) further reduces prices, causing aggregate supply to shift back to its long-run equilibrium.
D) decreases production and increase prices, mitigating the effects of the initial deflation.
Correct Answer:
Verified
Correct Answer:
Verified
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