MACROECONOMICS+ACHIEVE 1-TERM AC (LL)
MACROECONOMICS+ACHIEVE 1-TERM AC (LL)
10th Edition
ISBN: 9781319467203
Author: Mankiw
Publisher: MAC HIGHER
Question
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Chapter 1, Problem 1QQ
To determine

Identify which option is the period of recession.

Expert Solution & Answer
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Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b):

Recession is massive reduction in the economic activity. During the recession, there would be lower demand that in turn reduces the output, employment, and income in the economy. Thus, during the recession, the income would fall. Thus, option (b) is correct.

Option (a):

When the economy is growing (boom), there is more demand for goods and services. This in turn increases the output, employment, and income in the economy. It indicates that income increases during the boom period. Thus, option (a) is incorrect.

Option (c):

When the overall price level of the economy continues to increase for a period of time, it affects the purchasing power of the consumer. This continuous increase in the price level in the economy is the period of inflation. Thus, option (c) is incorrect.

Option (d):

When the supply of goods is greater than the demand for goods, the price of those goods will continuously fall. When the overall price level of the economy continues to fall for a period of time, this is termed as period of deflation. Thus, option (d) is incorrect.

Economics Concept Introduction

Recession: Recession is a significant decline in activity across the economy, lasting longer than a few months.

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