One complication in the process of reducing inflation by creating recessions is that the price level
A)adjusts more quickly to recessionary gaps than to inflationary gaps.
B)does not apply as it does in inflationary gaps.
C)always rises.
D)rarely falls.

Question

Quizplus · Accepted Answer

Prices are often sticky downwards, meaning they do not easily decrease even in the face of reduced demand during a recession. This phenomenon is partly due to factors like menu costs, wage contracts, and the reluctance of firms to engage in price wars.

One Complication in the Process of Reducing Inflation by Creating