ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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-2: -What Happens in a Recession? 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-3: -Measurable levels of spending and investment are likely to drop, and a natural downward pressure on prices may occur as aggregate demand slumps. GDP declines, and unemployment rates rise because companies lay off workers to reduce costs. At the microeconomic level, firms experience declining margins during a recession.

Detailed explanation-4: -Expansionary monetary policy is most suitable when an economy is in recession. This policy, in theory, has the potential to support and return the economy of the nation to the potential GDP. It does this by boosting investment and spending by lowering the interest rates.