Event: There is a war. Troops are committed to fighting overseas for the next th
ID: 1119563 • Letter: E
Question
Event: There is a war. Troops are committed to fighting overseas for the next three years. They will need supplies and equipment Due to this event, in the short run, does the economy move into a recession or an inflation? Event: There is a war. Troops are committed to fighting overseas for the next three years. They will need supplies and equipment Due to this event, in the short run, does the economy move into a recession or an inflation? Due to this event, in the short run, does the economy move into a recession or an inflation?Explanation / Answer
During a war the workers leave their jobs in order to participate in the war. This causes a decrease in the aggregate supply of the economy. As a result of low supply, the prices rise quickly because of the relative consistent demand. This leads to inflation in the economy.