Research on the effects of recessions on the real level of GDP shows that
A)recessions cause only temporary reductions in real GDP, which are offset by growth during the expansion phase.
B)recessions cause large, permanent reductions in the real level of GDP.
C)recessions cause both temporary and permanent declines in real GDP, but most of the decline is temporary.
D)recessions cause both temporary and permanent declines in real GDP, but most of the decline is permanent.

Question

Quizplus · Accepted Answer

Research has shown that recessions cause both temporary and permanent declines in real GDP, but most of the decline is temporary. This is because during a recession, there is a drop in economic activity and a decrease in the demand for goods and services. However, as the economy recovers, there is typically an increase in demand and economic growth resumes, offsetting the temporary decline in real GDP. While there may be some permanent effects, such as long-term unemployment or business closures, the overall impact on GDP is mostly temporary.

Research on the Effects of Recessions on the Real Level