Is this statement true or false?
Businesses react to contractions in the economy by increasing output.

true
false

This statement is false.

Businesses don't react to contractions in the economy by increasing output.

Explanation:

The reason behind this answer is that if companies increase their production to sell more, they are going to drive the price down. This is what happened with the recent oil crisis. The demand was down (this is the major phenomenon in a contraction, consumption goes down) and they didn't stop producing or reducing their production. U.S. oil production increased. Driving its price down. So, because this happened their business models were not efficient anymore and they required bailouts to not go bankrupt. So, they don't act like this. They reduce their costs, prices, and look for government subsidies in their products.