If the economy is initially at long-run equilibrium and aggregate demand declines, then in the long run the price level:
a. and output are higher than in the original long-run equilibrium.
b. and output are lower than in the original long-run equilibrium.
c. is lower and output is the same as the original long-run equilibrium.
d. is the same and output is lower than in the original long-run equilibrium.

The correct answer is option c.

Explanation:

In an economy, in the long run, the aggregate supply is fixed. The aggregate supply curve is a vertical line. This is because, in the long run, supply remains unaffected by price level. The increase in product price is balanced by an increase in input prices. So the supply does not change with change in the price level.  

In the long run, the supply changes with change in the availability of resources and change in technology. So when the aggregate demand declines, the demand curve shifts to the left. The equilibrium quantity remains the same but the price level declines.

It is also evident in the figure attached.

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