When There Is a Recession (A Fall in Output)and Prices

question 135

Multiple Choice

When there is a recession (a fall in output) and prices are increasing, and this situation is caused by adverse supply shocks, the term economists use to describe it is

• A) aggregate shifts.
• B) stagnation.
• C) inflation.
• D) stagflation.

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Definitions:

Unemployment

The situation where individuals who are capable of working and are seeking work are unable to find employment.

Classical Notion

An economic theory advocating for free markets, competition, and minimal government intervention in the economy.

Monetary Neutrality

The proposition that changes in the money supply do not affect real variables.

Long-Run Phillips

An economic concept suggesting that there is no long-term trade-off between inflation and unemployment, contrary to the short-run Phillips curve.