If the economy is in the recessionary phase of the business cycle, aggregate demand ___ unemployment ____ inflation ___ and the current account of the balance of payments is likely to move towards ____?
Correct answer: C. falls; rises; falls; surplus
- A. falls; falls; falls; surplus
- B. is static; low; rises; deficit
- C. falls; rises; falls; surplus
- D. rises; falls; rises; deficit
Explanation
A recession normally reduces aggregate demand, raises unemployment and lowers inflationary pressure. Lower domestic spending also reduces imports, so the current account tends to move toward surplus.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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