Question : A recession is characterized by:
Option 1: High inflation and high unemployment
Option 2: Low inflation and high unemployment
Option 3: High inflation and low unemployment
Option 4: Low inflation and low unemployment
Correct Answer:
Low inflation and high unemployment
Solution : The correct answer is (b) low inflation and high unemployment.
A recession is a period of significant economic decline characterized by a contraction in economic activity. During a recession, there is a widespread decline in various economic indicators, such as real GDP, income, employment, and trade.
Low inflation is a common characteristic of a recession. Inflation refers to the rate at which the general price level of goods and services is increasing over time. During a recession, there is typically a decrease in consumer demand, reduced business activity, and lower overall economic output. These factors contribute to a decrease in demand for goods and services, leading to downward pressure on prices and reduced inflationary pressures.
High unemployment is another key feature of a recession. Unemployment refers to the percentage of the labor force that is actively seeking employment but unable to find work. During a recession, businesses may reduce their workforce, lay off employees, or slow down hiring. This leads to an increase in the number of people looking for jobs without enough available opportunities, resulting in high unemployment rates.
