Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Aggregate demand increases, shifting the curve right
B
Aggregate supply decreases, shifting the curve left
C
Both curves remain unchanged
D
Aggregate demand decreases, shifting the curve left
Understanding the Answer
Let's break down why this is correct
Answer
When the economy is recovering from a recession, it means that businesses are starting to produce more goods and services because people are spending more money. This increase in spending raises aggregate demand, which is shown on the graph as a rightward shift of the aggregate demand curve. At the same time, businesses may also begin to hire more workers and invest in new equipment, which can increase aggregate supply as well. For example, if a car manufacturer sees more customers buying cars, it may expand its factory to produce more vehicles. Overall, the recovery leads to both higher demand and supply, which can help the economy grow and reduce unemployment.
Detailed Explanation
When the economy improves, people and businesses spend more money. Other options are incorrect because Some might think that supply goes down during recovery; It's a common mistake to think nothing changes in recovery.
Key Concepts
Aggregate Demand
Aggregate Supply
Equilibrium
Topic
Aggregate Demand and Supply Analysis
Difficulty
easy level question
Cognitive Level
understand
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