In the recent Global Financial Crisis, the US economy went from a situation of full employment to 12 per cent unemployment.What do you assume happened to prices?

Question

Quizplus · Accepted Answer

When there is high unemployment, it typically leads to a decrease in demand for goods and services, which in turn leads to a decrease in the price level. This decrease in the price level is known as deflation. Therefore, in this scenario, it is likely that prices fell and the economy experienced deflation.

In the Recent Global Financial Crisis, the US Economy Went