The economy is in long-run equilibrium. Suddenly, due to corporate scandals, a recession experienced by a major trading partner, and the loss of confidence among policymakers, citizens become pessimistic concerning the future. They maintain this level of pessimism for a long time.
Refer to the Scenario. Which statement is consistent with the aggregate demand and aggregate supply theory?
Question 12 options:
The expected price level rises. Bargains are struck for a greater increase in wages.
The expected price level rises. Bargains are struck for a smaller increase in wages.
The expected price level falls. Bargains are struck for a greater increase in wages.
The expected price level falls. Bargains are struck for a smaller increase in wages.