Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Economic recovery typically leads to increased aggregate demand due to higher consumer confidence.
B
An increase in aggregate supply during a recovery phase can lead to deflationary pressures.
C
Higher real interest rates are always a sign of a recovering economy.
D
Inflationary expectations among firms can result from increased demand as the economy recovers.
E
Supply-side improvements during recovery do not influence inflation rates.
Understanding the Answer
Let's break down why this is correct
Answer
Economic recovery happens when an economy starts to grow again after a downturn. During this time, both aggregate supply and aggregate demand can change. When demand increases, it often leads to more production as businesses try to meet the needs of consumers, which can help the economy recover faster. For example, if more people start buying cars, car manufacturers will need to produce more, creating jobs and increasing economic activity. On the other hand, if there are improvements in production technology or a decrease in costs, aggregate supply can shift to the right, also contributing to recovery by making goods cheaper and more available.
Detailed Explanation
Other options are incorrect because People often think that when the economy gets better, everyone spends more money; Some believe that more supply means prices will drop.
Key Concepts
Economic Recovery
Aggregate Supply and Demand Shifts
Inflationary Expectations
Topic
Economic Recovery and Supply Shifts
Difficulty
hard level question
Cognitive Level
understand
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