A recession can be expected to reduce inflation in the economy if the recession is caused by a(n)
A)increase in aggregate demand.
B)increase in aggregate supply.
C)decrease in aggregate demand.
D)decrease in aggregate supply.

Question

Quizplus · Accepted Answer

During a recession caused by a decrease in aggregate demand, there is typically a reduction in consumer spending, business investment, and overall economic activity. With lower demand for goods and services, businesses are forced to lower their prices in order to maintain sales, leading to a decrease in inflation.

A Recession Can Be Expected to Reduce Inflation in the Economy