Suppose the National Bureau of Economic Research announces that the economy has been in a recession for the past year. What effect might this announcement have on the economy?

Question

Quizplus · Accepted Answer

The announcement of a recession may cause businesses to reduce their hiring and trim payrolls to cut costs in response to decreasing demand for their products. This would be in line with Option B. Option A is unlikely because the Federal Reserve typically lowers interest rates to stimulate economic growth during a recession. Option C is unlikely because businesses tend to invest less during a recession, and Option D is unlikely because businesses usually wait for signs of a recovery before adding shifts or expanding production.

Suppose the National Bureau of Economic Research Announces That the Economy