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:

Production Possibilities Frontier

A diagram displaying the peak output scenarios for two different goods, given certain resources and influencing factors.

Economic Growth

An upswing in economic output regarding goods and services over a given time interval, typically evaluated using the Gross Domestic Product.

Improving Technology

The process of developing and applying new and better techniques, tools, and machines to increase efficiency, productivity, and quality in production or services.

Capital

Wealth in the form of money or other assets owned by a person or organization or available for purposes such as starting a company or investing.