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.

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Definitions:

Property Taxes

Taxes paid by property owners based on the assessed value of their real estate, typically levied by local governments.

Oversized

Describes an item, position, or trade that is larger than the normal or usual size; often used in finance to refer to large positions.

Production Equipment

Tools and machinery used in the manufacturing process to produce goods and services.

Net Working Capital

A measure of a company's short-term financial health, calculated as current assets minus current liabilities.