“In the last four months, GDP has been declining and many sectors have shown a contraction in business activity. Still, employment has remained constant. We are currently in a recession.” Evaluate this statement.
What will be an ideal response?
Given the information provided, the state of the economy described is not in a recession. First of all, a recession is a period of decline in total output, income and employment that lasts for six months or more. The statement only describes a decline in output and business activity that has lasted for four months. Also, the level of employment has stayed constant, which is uncharacteristic of a recession where employment usually declines. From the statement, although economic performance has declined, it is not clear that the economy is currently in a recession.
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An example of a barrier to entry is
A. plentiful natural resources. B. helpful government regulation. C. lack of a key resource. D. low-cost resources.
During the Great Depression of the 1930s, how much did output fall between 1929 and 1933?
a. 5 percent b. 10 percent c. 20 percent d. 30 percent e. 50 percent
If a natural disaster were to cause a negative long-run supply shock to the economy, once the economy adjusts, the new equilibrium will be at a:
A. higher price level and lower level of output. B. lower price level and lower level of output. C. higher price level and higher level of output. D. lower price level and higher level of output.
Event risk is the possibility that
A. the overall price level will rise faster than expected, so that the lender is repaid in dollars that are worth less than the lender expected. B. a borrower will face some circumstance that will prevent the borrower from paying the loan back. C. a major catastrophic occurrence, such as a hurricane, flood, or terrorist attack, will lower the return on the investment. D. the lender will go bankrupt before the loan is fully repaid.