When the economy goes into a recession, we can generally expect that
A)inflation will decrease while output will increase
B)inflation will increase while unemployment will decrease
C)inflation and output will increase
D)inflation will decrease while unemployment will increase
E)none of the above

Question

Quizplus · Accepted Answer

During a recession, there is a decrease in output which leads to a decrease in demand for goods and services. This decrease in demand causes prices to fall, resulting in a decrease in inflation. However, the decrease in output also leads to companies cutting back on their workforce, causing an increase in unemployment. Therefore, inflation decreases while unemployment increases during a recession.

When the Economy Goes into a Recession, We Can Generally