Suppose a Recession Occurs as a Result of a Supply

question 56

Multiple Choice

Suppose a recession occurs as a result of a supply shock,and instead of the economy naturally working its way back to equilibrium,the government uses policy to shift the aggregate demand curve to fight the recession.Using policy this way would

• A)bring real GDP back to potential GDP more quickly but would result in a permanently higher price level.
• B)bring real GDP back to potential GDP more slowly but would bring the price level back to the original price level more quickly.
• C)quickly result in a new,higher level of real GDP and a permanently lower price level.
• D)bring the price level back to its original level more quickly but would result in a permanently lower level of potential GDP.

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Definitions:

Acquiring Knowledge

The process of absorbing, understanding, and retaining new information through various methods such as observation, studies, and experiences.

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Painful menstruation that affects daily activities, which can be primary (not associated with other diseases) or secondary (associated with reproductive system disorders).

Painful Menstruation

Discomfort and pain during the menstrual cycle, medically known as dysmenorrhea.

Reflective Thinking

Type of logical thinking that becomes more prominent in adulthood, involving continuous, active evaluation of information and beliefs in the light of evidence and implications.