Which of the following scenarios could result in a recession?
A) Aggregate demand decreases,and wages are flexible.
B) Aggregate demand decreases,and wages are sticky.
C) Aggregate demand increases,and wages are flexible.
D) Aggregate demand increases,and wages are sticky.

Question

Quizplus · Accepted Answer

A decrease in aggregate demand can lead to a decrease in output and employment, which in turn may cause prices and wages to be sticky or not adjust quickly enough. This can exacerbate the recession and lead to a prolonged period of economic downturn. In scenarios A, C, and D, the impact on the economy may vary depending on the flexibility of wages, but none of them necessarily indicate a recession.

Which of the Following Scenarios Could Result in a Recession