Among the factors that might have led to the outbreak of the 2007-09 recession, which most likely caused a shift of the IA line instead of the AD curve?
A)Sharp increases in commodity prices.
B)Credit crunch.
C)Financial crisis.
D)Collapse of the housing bubble.
E)Stock market collapse.

Question

Quizplus · Accepted Answer

Sharp increases in commodity prices can lead to a shift of the IA line because they increase the cost of production for firms, which in turn reduces their supply.

Among the Factors That Might Have Led to the Outbreak