A massive decrease in aggregate demand plunges the U.S. economy into a recession and unemployment rates soar to 10%. According to the classical model of macroeconomic equilibrium,
a. the economy will stagnate in a recession unless measures are taken to increase aggregate demand.
b. nominal wages will decline, increasing aggregate supply until full employment is restored.
c. nominal wages will remain fixed.
d. the aggregate supply curves will shift inward, making the recession worse.
e. the price level won't decline.
Answer: B
Microeconomics
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