Final answer:
The decline in investment spending accounts for about two-thirds of output decline during a recession, with businesses cutting back on investments in response to decreased consumer spending and economic uncertainty. Other factors like declines in consumption and net exports also contribute to recessionary gaps. O the decline in investment spending.
Step-by-step explanation:
The account that accounts for about two-thirds of the decline in output during a recession is the decline in investment spending. During recessions, businesses often see a drop in consumer spending and become pessimistic about future economic conditions. This leads to a reduction in expectations of the profitability of investments, causing businesses to cut down on investment expenditure. A recessionary gap can also be influenced by a decline in consumption, a rise in savings, a fall in net exports, a drop in government spending, or a rise in taxes. These factors shift the aggregate expenditure line down, potentially causing a recession.
For example, the latest recession was significantly influenced by a decline in aggregate demand. Over 20 million people became unemployed, and consumption plummeted. While the federal government took measures to mitigate these effects with small business loans, direct aid, and stimulus checks, a full recovery was slow due to continuing economic uncertainty and the impact of new variants of the virus.
It's worth noting that a drop in net exports alone does not typically account for the majority of the output decline in a recession. However, they can have a significant effect on the economy, especially if multiple countries experience a downturn simultaneously, as seen with the Asian financial crisis that reduced the demand for U.S. goods and services.