Which of the following is a period during which aggregate output, as measured by real GDP, declines
A. System-wide economic disorder
B. Deflation
C. Stagflation
D. Recession
E. Inflation
Aggregate output in an economy declines during a recession. This is because economic activities are declining. When such occurs GDP declines. This is different from stagflation in the sense that during a recession, only real GDP declines. However, in a stagflation, the fall in GDP also results to the increase in inflation. During recessions, economic activities are low so is price level.
