Economy in Equilibrium | Short-Run Employment Rate | CFA Level 1 Test Prep

Short-Run Employment Rate

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Question

An economy is currently in equilibrium at full employment. If there is an unanticipated decrease in demand, the employment rate in the short run:

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A. B. C. D.

D

If there is an unanticipated decrease in demand, the demand curve will move to the left. The supply curve will not move in the short run since the demand cut-back is unanticipated. This will lead to a decrease in the employment rate and a fall in real GDP. Prices will also fall as a result of decreased demand.