Mgt 501 Management and Organizational Behavior

Week5 Module 5 Case

Recessions and Economic Stimulus

A recession is a period of decline in total output, income, employment, and trade. This downturn, which last 6 months or more, is marked by the widespread contraction of business activity in many sectors of the economy. But because many prices are downwardly inflexible, the price level is likely to fall only if the recession is severe and prolonged-that is, only if a depression occurs.

Why a recession might occur? The aggregate demand aggregate supply model is a variable-price model that enables analysis of simultaneous changes of real GDP and the price level. The aggregate demand curve is down sloping because of the real-balances effect, the interest-rate effect, and the foreign purchases...