The United States began to pull out of a recession in the spring of 1991. Unemployment fell, but inflation did not increase. What was the most likely cause of this?

Question

Quizplus · Accepted Answer

If unemployment is falling but inflation is not increasing, it suggests that there is a relatively low level of aggregate demand, which is being met by an increase in aggregate supply. This scenario is consistent with choice A, where aggregate supply is increasing at a faster rate than aggregate demand.

The United States Began to Pull Out of a Recession