QuestionJuly 19, 2025

The Covid recession was unusual since the decrease in Real GDP was caused by: A. only a decrease in AD. B. only a decrease in SAS. C. decreases in both AD and SAS. D. increases in both AD and SAS.

The Covid recession was unusual since the decrease in Real GDP was caused by: A. only a decrease in AD. B. only a decrease in SAS. C. decreases in both AD and SAS. D. increases in both AD and SAS.
The Covid recession was unusual since the decrease in Real GDP was caused by:
A. only a decrease in AD.
B. only a decrease in SAS.
C. decreases in both AD and SAS.
D. increases in both AD and SAS.

Solution
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Answer

C. decreases in both AD and SAS. Explanation 1. Identify the cause of GDP decrease The Covid recession involved both demand-side and supply-side disruptions. 2. Analyze AD and SAS changes Aggregate Demand (AD) decreased due to reduced consumer spending and investment. Short-run Aggregate Supply (SAS) decreased due to supply chain disruptions and labor market issues.

Explanation

1. Identify the cause of GDP decrease<br /> The Covid recession involved both demand-side and supply-side disruptions. <br /><br />2. Analyze AD and SAS changes<br /> Aggregate Demand (AD) decreased due to reduced consumer spending and investment. Short-run Aggregate Supply (SAS) decreased due to supply chain disruptions and labor market issues.
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