CA Foundation · Business Economics · Business Cycles
Which of the following best describes a depression as distinguished from an ordinary recession?
A depression is a very severe and prolonged contraction, with a steep fall in output and incomes and massive unemployment. It is far deeper and longer than an ordinary recession. A mild short dip or a rise in output does not qualify.
- AA brief, mild fall in output lasting a few weeks
- BA very severe and prolonged contraction with massive unemployment and a sharp fall in output and incomesCorrect
- CA period of rising prices with rising output
- DThe phase just after the trough when output starts rising
Explanation
A depression is an extreme form of contraction that is deep and long-lasting, with very high unemployment and sharply lower output and incomes. A mild short dip is not a depression, and rising output marks recovery or expansion.
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