A recovery phase if
A) prices and wages are flexible.
B) nominal wages and prices rise.
C) resource prices are higher.
D) policymakers respond to a recessionary gap by increasing aggregate demand.

Question

Quizplus · Accepted Answer

A recovery phase occurs when policymakers respond to a recessionary gap (a decrease in aggregate demand causing a decrease in output and employment) by increasing aggregate demand through expansionary monetary or fiscal policies. This leads to an increase in output and employment, and consequently, a recovery of economic growth. Flexible prices and wages, nominal wage and price increases, and higher resource prices may affect the recovery phase, but they are not the main cause or characteristic of it.

A Recovery Phase If