Supply-side theories claim that__________________?
Correct answer: B. a decline in aggregate supply is responsible for economic downturns
- A. business cycles are caused by insufficient supply
- B. a decline in aggregate supply is responsible for economic downturns
- C. an increase in aggregate supply causes output and employment to decline
- D. none of the above
Explanation
Supply-side explanations attribute economic downturns to adverse changes in aggregate supply, which reduce output and employment. An increase in aggregate supply would generally raise, not reduce, output, so B fits best.
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