GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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High levels of unemployment combined with high levels of inflation could indicate that the business cycle has entered into a period of-
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recession
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stagflation
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expansion
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investment
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Explanation:
Detailed explanation-1: -Unemployment increases during business cycle recessions and decreases during business cycle expansions (recoveries). Inflation decreases during recessions and increases during expansions (recoveries).
Detailed explanation-2: -With lower demand for goods and services, firms start laying off workers and at the same time refrain from raising prices. So unemployment rises and inflation falls during recessions.
Detailed explanation-3: -While inflation does not have to trigger a recession, governments try to tame inflation by slowing down all of that spending. Slowing down economic activity doesn’t always lead to a recession, but if that slowdown becomes a self-sustaining cycle it very easily can.
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