Use the Following Graph to Answer the Following Questions

question 97

Multiple Choice

Use the following graph to answer the following questions.The graph depicts an economy where aggregate demand and long-run aggregate supply (LRAS) have decreased,with no change in short-run aggregate supply (SRAS) .

-During the Great Recession,real gross domestic product (GDP) decreased,yet the aggregate price level remained largely unchanged,as depicted in the graph.Unemployment increased to above-normal levels.Which of following best explains why this happened?

• A) A significant decline in military spending following the end of a war led to a recession.
• B) A sharp recession followed the United States abandoning the gold standard.
• C) A decline in housing prices and stock prices,plus a financial crisis,caused a recession.
• D) A sudden increase in oil prices caused inflation and a deep recession.
• E) A stock market crash,large numbers of bank failures,an increase in tax rates,and a tight money supply caused a recession.

---

Definitions:

Falls

In physics, refers to the motion of an object under the influence of gravitational acceleration towards the Earth, without considerations for air resistance.

Horizontal

Referring to a direction or plane parallel to the ground or base line, at a right angle to the vertical.

Sketch Graph

The process of drawing a rough graph of a mathematical function or equation based on its key features, without the use of precise calculations.

Absolute Value

The distance of a number from zero on a number line, without considering direction.