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:

Dependent Variable

A variable in statistical modeling, experiments, or observations that is expected to change as a result of manipulations in the independent variable(s).

Independent Variables

Variables that are manipulated or categorically varied by researchers in an experiment to determine their effect on dependent variables.

Multicollinearity

Refers to a situation in statistics where independent variables in a regression model are highly correlated, potentially leading to difficulties in estimating the relationship between each independent variable and the dependent variable.

Independent Variables

Variables in an equation or model that are assumed to influence or cause changes in dependent variables.