During the recession of 2001, despite the decrease in aggregate demand, the price level was essentially stable. Which of the following is a reason for this?
A) Firms responded to the decline in output demanded by making quantity adjustments and not price adjustments.
B) The short-run aggregate supply curve must have also shifted to the left.
C) The short-run aggregate supply curve must have also shifted to the right.
D) The short-run aggregate supply curve must be horizontal due to severe wage and price stickiness.

Question

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The Answer of During the recession of 2001, despite the decrease in aggregate demand, the price level was essentially stable. Which of the following is a reason for this?
A) Firms responded to the decline in output demanded by making quantity adjustments and not price adjustments.
B) The short-run aggregate supply curve must have also shifted to the left.
C) The short-run aggregate supply curve must have also shifted to the right.
D) The short-run aggregate supply curve must be horizontal due to severe wage and price stickiness.

During the Recession of 2001, Despite the Decrease in Aggregate