Question

What happens to the price level when aggregate demand (AD) declines?
Multiple choice question.

The price level decreases.

The price level increases.

The price level remains the same.

There is not enough information.

Answer 1

When aggregate demand (AD) declines, the price level typically decreases. This is because a decline in AD leads to lower demand for goods and services, which can result in downward pressure on prices. Therefore, the correct answer is:

**The price level decreases.**