ECONOMICS (CBSE/UGC NET)

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: -While no investment is guaranteed to be recession-proof, some tend to perform better than others during downturns. These include health care and consumer staples stocks (or funds tracking those sectors), large-cap stocks and income investments.

Detailed explanation-3: -As demand for goods and services falls, companies need fewer workers and may lay off staff to cut costs. Laid off staff have to cut their own spending, which in turn hurts demand, which can lead to more layoffs. In recent years, recessions have become less frequent and don’t last as long.

Detailed explanation-4: -Gains. Before and early in a recession, stock prices often fall, making it a good time to buy. If you’re one who continues to dollar-cost average into your 401(k) plan, IRA, or other investment accounts, buying as stock prices fall pays off in the long run.