why-do-the-static-assumptions-of-the-standard-ad-as-model-fail-to-predict-econom

Question

Why do the static assumptions of the standard AD-AS model fail to predict economic behavior during recessions?

Accepted Answer

They assume price levels always decrease during recessions.

Answer

They assume potential GDP decreases during recessions.

Answer

They assume aggregate demand increases during recessions.

Answer

They assume long-run aggregate supply shifts left during recessions.