During the Recession of 2001, Despite the Decrease in Aggregate

question 36

Multiple Choice

During the recession of 2001, despite the decrease in aggregate demand, the price level was essentially stable. Which of the following is a reason for this?

• A) Firms responded to the decline in output demanded by making quantity adjustments and not price adjustments.
• B) The short-run aggregate supply curve must have also shifted to the left.
• C) The short-run aggregate supply curve must have also shifted to the right.
• D) The short-run aggregate supply curve must be horizontal due to severe wage and price stickiness.