Question
Which of these events would most likely cause a recession?
(1 point)
Responses
The price of gasoline rises by ten percent.
The price of gasoline rises by ten percent.
Political leaders pass large spending cuts.
Political leaders pass large spending cuts.
Many people find new jobs at the same time.
Many people find new jobs at the same time.
The value of total net exports rises unexpectedly.
The value of total net exports rises unexpectedly.
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1 answer
Among the options provided, the event most likely to cause a recession is:
Political leaders pass large spending cuts.
Large spending cuts by the government can lead to reduced aggregate demand in the economy, which can negatively impact economic growth and potentially lead to a recession. In contrast, increases in gasoline prices or rising total net exports would not typically cause a recession outright, and finding new jobs would generally contribute positively to the economy.
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