ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A contraction generally occurs after the business cycle peaks, but before it becomes a trough. According to most economists, when a country’s real gross domestic product (GDP)-the most-watched indicator of economic activity-has declined for two or more consecutive quarters, then a recession has occurred.

Detailed explanation-2: -A contraction is a period when economic output declines. During this phase, the economy is producing fewer goods and services than it did before. When fewer goods and services are produced, fewer resources are used by firms-including labor.

Detailed explanation-3: -Wars and pandemics are two situations that can make consumer trends unpredictable in the short, medium and long term, thus generating economic uncertainty. Because businesses and people hold off on spending and investment decisions, economic activity declines.

Detailed explanation-4: -1. When GDP declines during a recession, growth in real consumption and investment spending both decline; unemployment rises sharply. 2. The price of a magazine is an example of a price that is sticky in the short run and flex-ible in the long run.

Detailed explanation-5: -If GDP is falling, then the economy is shrinking-bad news for businesses and workers. If GDP falls for two quarters in a row, that is known as a recession, which can mean pay freezes and lost jobs.