The U.S. Economy Shrank 1.6% in the First Quarter July 5, 2022February 28, 2023 ~ EconEye Admin One quarter of negative economic growth is creating recession fears and inflation is soaring.—cnn.com Answer the following questions to check your understanding of the story. 1) When would recession fears become recession? Recession fears become recession when ______________. a) inflation is greater than 2 percent a year b) inflation soars for two quarters c) real GDP is below potential GDP d) real GDP falls for a second successive quarter Wrong! - What are the characteristics of a recession? Is a recession always accompanied by inflation? Good Job! - A recession is a period during which real GDP decreases—its growth rate is negative—for at least two successive quarters. 2) Using the AS/AD model, what happened to aggregate supply and aggregate demand in the first quarter of 2022? a) Aggregate demand decreased and short-run aggregate supply increased. b) Short-run aggregate supply and aggregate demand decreased but aggregate demand decreased more than short-run aggregate supply. c) Short-run aggregate supply increased with no change in aggregate demand. d) Short-run aggregate supply decreased with no change in aggregate demand. Wrong! - Does the price level rise when aggregate demand decreases and short-run aggregate supply increases, or when aggregate demand decreases by more than aggregate supply decreases? Does negative economic growth occur when short-run aggregate supply increases? Good Job! - For negative economic growth to occur and the price level to rise, short-run aggregate supply must have decreased. Close Quiz Share this: Share on Facebook (Opens in new window) Facebook Like this:Like Loading...
