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In the context of inflation, deflation, and recession, which of the following time periods corresponds to a recession based on the CPI index?

a) A period of rapidly increasing prices.
b) A period of stable prices.
c) A period of decreasing prices.
d) A period of increasing and decreasing prices.

User Noodl
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1 Answer

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Final answer:

A recession corresponds to a period of decreasing prices, due to higher unemployment and reduced demand for goods, as seen in historical events like the Great Depression and the Great Recession.

Step-by-step explanation:

In the context of inflation, deflation, and recession, a recession would most closely correspond to a period of stabilizing or decreasing prices, which is option c) A period of decreasing prices. This is because during a recession, high levels of unemployment are typically present and the overall demand for goods falls, leading to a reduction in the price level. For example, historically, times such as the Great Depression and the Great Recession of 2008-2009 were characterized by low inflation rates or even deflationary periods. Conversely, periods of rapid economic growth often result in higher inflation, with lower unemployment rates.

User HSir
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