The Most Likely Explanation of the Recession of 1981-1982 Was

question 32

Multiple Choice

The most likely explanation of the recession of 1981-1982 was

• A) an increase in energy prices.
• B) a collapse in investment spending.
• C) that it was an unfortunate byproduct of a decrease in inflation.
• D) a dramatic decrease in stock prices.

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Definitions:

Purely Competitive Market

An idealized market structure characterized by a large number of small firms, identical products, and free entry and exit, leading to perfect competition.

Long-run Equilibrium

The state in which all factors of production and costs are variable, leading to a situation where no firm in the market wants to change its output level, assuming no external changes.

Producer Surplus

The difference between the actual price a producer receives (or producers receive) and the minimum acceptable price; the triangular area above the supply curve and below the market price.

Purely Competitive Market

A market structure characterized by a large number of small firms, identical products, and free entry and exit, which leads to firms being price takers.