CA Foundation · Business Economics · Business Cycles
During the recovery phase following a trough, which development is most likely?
Business investment and employment begin to rise gradually from low levels. In recovery, demand revives after the trough, idle capacity starts to be used and confidence improves. Falling output, mass layoffs and peak inflation belong to contraction or the peak phases.
- ABusiness investment and employment begin to rise gradually from low levelsCorrect
- BOutput starts to fall faster than before
- CInflation reaches its highest level of the cycle
- DFirms lay off workers on a large scale because of falling demand
Explanation
Recovery begins when demand revives: consumption and investment pick up, idle capacity is used and employment slowly increases. Falling output, peak inflation and large layoffs are features of contraction or the peak, not recovery.
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