Assume that the economy is initially in equilibrium at a price level of 100 and a potential GDP of $1000 billion. If aggregate demand falls,
The price level will initially decline but will return to 100 when the self-correcting mechanism restores potential GDP
The price level will initially rise but will return to 100 when the self-correcting mechanism restores potential GDP
The price level will initially decline but will fall even further when the self-correcting mechanism restores potential GDP
The price level will initially increase but will rise even further when the self-correcting mechanism restores potential GDP
