During recession, the unemployment rate ________ and output ________.
Options
ARises; falls
BRises; rises
CFalls; rises
DFalls; falls
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Business CyclesPYQ - Jan 2021Question 87 of 20
All Questions Correct Answer
✅ Option a — Rises; falls
All Options:
- ARises; falls
- BRises; rises
- CFalls; rises
- DFalls; falls
Detailed Solution & Explanation
During a recession, several key economic indicators are affected.
• The unemployment rate is one such indicator, which tends to increase as businesses reduce production and lay off workers due to decreased demand for their products.
• As a result, the number of people without jobs rises, leading to higher unemployment rates.
• Another important indicator is the overall output of the economy, which also decreases during a recession.
• This decrease in output is a direct consequence of reduced consumer spending, lower business investment, and decreased production levels.
The correct relationship between unemployment and output during a recession is based on the concept of the business cycle and the law of supply and demand.
• Option b is incorrect because output does not rise during a recession, and option c is incorrect because unemployment does not fall during this period.
• Understanding these relationships is essential in business economics to analyze the performance of an economy and make informed decisions.
About This Chapter: Business Cycles
Paper
Paper 4: Business Economics
Weightage
5%
Key Topics
Phases, Features, Causes
Business Cycles describe the recurring fluctuations in economic activity — Expansion, Peak, Recession, and Trough. This chapter covers the phases, features, and causes of business cycles, along with theories explaining why economies go through regular boom-bust patterns.
View Official ICAI SyllabusExam Strategy Tip
This is a lower-weightage chapter but easy to score. Focus on memorizing the four phases and their characteristics. Questions are usually straightforward.
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The lowest point in the business cycle is referred to as the:
Which of the following is not an example of coincident indicator?
Features of Business Cycles include:
Which one is an external cause of business cycles?
During expansion phase, employment:
Economic recession shares all of these characteristics except:
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