ECONOMICS

Detailed explanation-1: -In a downturn, inventories can build up as sales slow. Customers may have less money to spend on nonessential items, while prices also increase. Holding large amounts of excess inventory can cause problems going into a recession.

Detailed explanation-2: -In a recession, the government could pursue expansionary fiscal policy (“looser fiscal policy”) and try to increase AD. For example, cutting income tax will give consumers more income and should lead to an increase in consumer spending. This should lead to an increase in AD and higher economic growth.

Detailed explanation-3: -When the economy is sluggish, people will buy fewer goods and services at a fixed price point. Therefore, demand curves for most products will temporarily shift to the left during a recessionary period. Consumer spending and production generally bounce back due to pent-up demand, but that is not always the case.

Detailed explanation-4: -A recession can be defined as a sustained period of weak or negative growth in real GDP (output) that is accompanied by a significant rise in the unemployment rate. Many other indicators of economic activity are also weak during a recession.