In 2009, during the height of the U. S. financial crisis, real GDP fell 3.5 percent and the Consumer Price Index fell from 215.3 to 214.9. Was this recession likely caused by a shift in aggregate demand or aggregate supply?

Question

Business

Amelia Mora

2 December, 02:04

In 2009, during the height of the U. S. financial crisis, real GDP fell 3.5 percent and the Consumer Price Index fell from 215.3 to 214.9. Was this recession likely caused by a shift in aggregate demand or aggregate supply?

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Answers (1)

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Irvin Watson · Answer 1

This was most likely caused by a shift in the aggregate supply curve to the left.

Explanation:

a recession is when the economy is declining and this can be caused by declining trade and industrial activity so if Real GDP decreases that means there was a decline in prices and a deflation in the market therefore this can be caused by increases in wages or the value of wages which can cause more consumption in the market and then prices fall, an decrease in physical stock which is like people employed where the cost of producing one more unit increases at a decreasing rate so firms end up not hiring more people.