ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -There is a commensurate rise in unemployment. The growth in the economy continues to decline, and as this falls below the steady growth line, the stage is called a depression.

Detailed explanation-2: -The downswing of the business cycle towards a trough is called an economic contraction. It is associated with: decrease in production/output • increase in unemployment • decrease in wages • decrease in consumer spending.

Detailed explanation-3: -Real GDP then falls during a period of recession. Eventually it starts upward again (at time t 2). The point at which a recession ends and an expansion begins is called the trough of the business cycle.

Detailed explanation-4: -Unemployment increases during business cycle recessions and decreases during business cycle expansions (recoveries). Inflation decreases during recessions and increases during expansions (recoveries).