Question

For several years policymakers have systematically boosted aggregate demand so that the economy is operating with very low unemployment and sustained inflation. If this sustained expansion to aggregate demand is halted, what is the likely result?

Answer 1

Deflation and high rate of unemployment sets in

Step-by-step explanation:

Aggregate demand is the total sum of consumption, investment, government expenditure, and net exports of a nation.

When there is a halt in the aggregate demand, it leads to a high rate of unemployment, thereby creating deflation or low money in circulation. This usually lead to low rate in the purchase of desired goods and services.