Recall Application 2, "Two Approaches to Determining the Causes of Recessions," to answer the following questions:
-According to the application, a recession is likely to be caused by a decrease in aggregate supply if:
A) prices change but output does not change in the long run.
B) both prices and output do not change in the long run.
C) both prices and output change in the long run.
D) prices do not change but output changes in the long run.

Question

Quizplus · Accepted Answer

A recession caused by a decrease in aggregate supply is characterized by changes in both prices and output in the long run, as the supply shock affects the economy's production capacity and price levels.