When Most Consumers and fiRms Reduce Spending Only Because They

question 222

Multiple Choice

When most consumers and firms reduce spending only because they expect other consumers and firms to reduce spending, and a recession results,

• A) a self-correction has occurred.
• B) an adverse aggregate supply shock has occurred.
• C) a coordination failure has occurred.
• D) a real-business downturn has occurred.

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Definitions:

Operating Lease

An agreement permitting the utilization of a property without transferring ownership rights to it.

Lessor

The party in a lease agreement that owns the asset and grants the lessee the right to use the asset in return for lease payments.

Bargain Purchase Option

A lease clause allowing the lessee to purchase the leased asset at a price significantly lower than its expected fair market value at the end of the lease term.

Leased Asset's Useful Life

The expected period over which a leased asset is anticipated to be used by the lessee, often corresponding to the lease term unless a shorter period is more representative.