When an economy is in recession, the unexpected inflation rate will be:
A) positive.
B) zero.
C) negative.
D) the natural rate.

Question

Quizplus · Accepted Answer

During a recession, demand for goods and services decreases, leading to lower prices or a slower rate of price increase than anticipated, which can result in negative unexpected inflation. This is because inflation expectations are not met when economic activity slows down.

When an Economy Is in Recession, the Unexpected Inflation Rate