CFA Practice Question

CFA Practice Question

According to the classical view of fiscal policy, a decrease in aggregate demand will be followed by:
A. A fall in prices, and an increase in aggregate supply so that GDP (measured by quantity) is permanently maintained at a lower level.
B. A rise in prices, and an increase in aggregate supply so that GDP (measured by quantity) is maintained at the same level.
C. A fall in prices, and an increase in aggregate supply so that GDP (measured by quantity) is maintained at the same level.
Explanation: Classicists argue that changes to aggregate demand do not affect the actual level of output.

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