In the recession stage, which of the following typically occurs?

In the recession stage, which of the following typically occurs?

• A. Inflation increases
• B. Unemployment rises
• C. Tax revenue surges
• D. Public expenditure expands automatically

Answer: (B)

During a recession, overall demand for goods and services weakens. Firms respond by slowing production and laying off workers, so unemployment rises. This rise is a typical feature of the downturn in the business cycle, reflecting weak demand and idle capacity. Inflationary pressures usually ease because weaker demand reduces price growth. Tax revenues tend to fall as incomes and profits shrink, and while automatic stabilisers can increase welfare spending, the most consistent and defining outcome in a recession is higher unemployment.

During a recession, overall demand for goods and services weakens. Firms respond by slowing production and laying off workers, so unemployment rises. This rise is a typical feature of the downturn in the business cycle, reflecting weak demand and idle capacity. Inflationary pressures usually ease because weaker demand reduces price growth. Tax revenues tend to fall as incomes and profits shrink, and while automatic stabilisers can increase welfare spending, the most consistent and defining outcome in a recession is higher unemployment.