The net loss to the economy as a result of a recession
A) includes some measure of the deviation of GDP from its potential.
B) must take into account the value of leisure time, which increases in recessions.
C) must take into account that taxes lead to a bias against market work and in favor of nonmarket activities.
D) all of the above.
E) a and b only.

Question

Quizplus · Accepted Answer

The net loss to the economy due to a recession encompasses various factors, including the deviation of GDP from its potential (A), the increased value of leisure time as unemployment rises (B), and the shift in behavior due to taxes favoring nonmarket activities over market work (C). Therefore, all of the above (D) are correct.

The Net Loss to the Economy as a Result of a Recession