ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Economic output, employment, and consumer spending drop in a recession. Interest rates are also likely to decline as the central bank (such as the U.S. Federal Reserve Bank) cuts rates to support the economy.

Detailed explanation-2: -During a recession, stock prices typically plummet. The markets can be volatile with share prices experiencing wild swings. Investors react quickly to any hint of news-either good or bad-and the flight to safety can cause some investors to pull their money out of the stock market entirely.

Detailed explanation-3: -Businesses large and small face declines in sales and profits in a recession. Their efforts to cut costs may include layoffs and cuts in capital spending, marketing, and research. Recessions may curb credit access, slow collections, and spur business bankruptcies.

Detailed explanation-4: -When the economy slows, investors often assume corporate profits will also decline. That leads to falling stock prices. However, share prices can recover long before the recession ends because investors are an optimistic bunch.