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Why might “belt-tightening” by consumers in a recession be unwelcome?
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Solved in 3 steps
- Define what economists mean when they use the word: “recession”?What happens when firms and workers underestimate future prices in the economy? Explain the answer while focusing on what would happen to actual output as opposed to the expected potential output.Explain in details how high inflation can lead to a recession in several ways.
- How do propensities and multipliers, and even expectations affect the outcomes in a downturnSuppose that an economy wants to boost available labor hours in order to increase aggregate supply. What is the best way to accomplish this?Why do sticky wages and prices increase the impact of an economic downturn on unemployment and recession?
- How can shipping delays and shortages of intermediate goods cause a recession? Why may these issues lead to a reduction in consumer spending? Consider how consumers change the timing of their purchases to reflect the market.Explain why a sudden, large burst of inflation could lead to a recession?What happens when firms and workers underestimate future prices in the economy. On what would happen to actual output as opposed to the expected potential output.
- What factors influence the demand for non-durable goods during an economic recession?When an economy dips into a recession, consumers will often be relatively pessimistic about the future for an extended period time. How will this pesimism affect the speed and strength of the recovery?What happens when firms and workers underestimate future prices in the economy? Focus your answer on what would happen to actual output as opposed to the expected potential output. (Course is macroeconomics).