Suppose that as a result of expectations of lower sales in the future, a decrease in autonomous business investment causes aggregate demand to shift from AD0 to AD1 as shown in Figure 10.1. Which of the following statements is true?
. According to Keynesian theory, additional decreases in aggregate demand will occur.
. The GDP gap will be eliminated by the multiplier.
. According to Keynesian theory, the economy will quickly adjust back to full employment.
. In the absence of any additional decreases in investment, the equilibrium will remain at Q1 indefinitely.