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. Which statement is consistent with the aggregate demand and aggregate supply theory?

A) The expected price level rises. Bargains are struck for higher increases in wages.
B) The expected price level rises. Bargains are struck for lower increases in wages.
C) The expected price level falls. Bargains are struck for higher increases in wages.
D) The expected price level falls. Bargains are struck for lower increases in wages.