Consumers decide to increase their level of savings to repay a larger portion of household debt. What happens?
A. Aggregate supply shifts to the left, causing equilibrium GDP to decline
B. Aggregate demand increases, causing the recessionary GDP gap to diminish
C. Aggregate supply and aggregate demand both shift to the left, causing equilibrium GDP to decline
D. Aggregate demand declines, resulting in lower levels or real output and GDP
E. Aggregate demand shifts to the right, causing a higher equilibrium rate
Answer: D
Microeconomics
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