Question 46
Which of the following will most likely accompany an unanticipated reduction in aggregate demand?
(1) an increase in real GDP
(2) an increase in resource prices
(3) an increase in the general price level
(4) an increase in unemployment

An unanticipated reduction in aggregate demand typically leads to an increase in unemployment. When demand for goods and services falls unexpectedly, businesses may respond by slowing production and, consequently, laying off workers. This rise in unemployment reflects the disconnect between supply and demand in the economy.

Additionally, a drop in aggregate demand often results in lower pressure on prices, as businesses attempt to entice consumers with reduced prices. This means the general price level is also likely to decrease rather than increase, leading to deflationary pressures in the economy.