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Which of the following are the traits of depression?
1. An extremely low aggregate demand in the economy causes activities to decelerate.
2. Inflation is comparatively higher.
3. The employment avenues start shrinking forcing unemployment rate to grow fast.
Which of these statements is/are correct?
- a)1 and 2 Only
- b)2 and 3 Only
- c)1 and 3 Only
- d)All of them
Correct answer is option 'C'. Can you explain this answer?
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Which of the following are the traits of depression? 1. An extremely ...
The major traits of depression could be as given below.
- (i) an extremely low aggregate demand in the economy causes activities to decelerate;
- (ii) the inflation being comparatively lower;
- (iii) the employment avenues start shrinking forcing unemployment rate to grow fast;
- (iv) to keep the business going, production houses go for forced labour-cuts or retrenchment (to cut down production cost and be competitive in the market,) etc.
Most Upvoted Answer
Which of the following are the traits of depression? 1. An extremely ...
The correct answer is option 'C' - 1 and 3 Only. Let's discuss each statement and why it is correct or incorrect.
1. An extremely low aggregate demand in the economy causes activities to decelerate.
This statement is correct. In a depression, there is a significant decrease in aggregate demand, which refers to the total demand for goods and services in an economy. When aggregate demand is low, businesses experience a decrease in sales, leading to a decline in production and economic activities. As a result, the overall economy slows down.
2. Inflation is comparatively higher.
This statement is incorrect. In a depression, inflation tends to be low or even negative. Depressions are characterized by deflationary pressures, where the overall price level decreases. This is because the decrease in aggregate demand leads to a decrease in prices as businesses try to attract consumers with lower prices. Therefore, inflation is not higher but rather lower during a depression.
3. The employment avenues start shrinking, forcing the unemployment rate to grow fast.
This statement is correct. In a depression, businesses face reduced demand for their products and services, which leads to a decline in production. As a result, businesses may resort to cost-cutting measures, including reducing their workforce. This leads to a shrinking of employment avenues and a rise in the unemployment rate. High unemployment is one of the significant consequences of a depression.
In summary, option 'C' is the correct answer because statements 1 and 3 accurately describe the traits of depression. The low aggregate demand causing a deceleration in activities and the shrinking employment avenues leading to a fast-growing unemployment rate are both characteristics of a depression.
1. An extremely low aggregate demand in the economy causes activities to decelerate.
This statement is correct. In a depression, there is a significant decrease in aggregate demand, which refers to the total demand for goods and services in an economy. When aggregate demand is low, businesses experience a decrease in sales, leading to a decline in production and economic activities. As a result, the overall economy slows down.
2. Inflation is comparatively higher.
This statement is incorrect. In a depression, inflation tends to be low or even negative. Depressions are characterized by deflationary pressures, where the overall price level decreases. This is because the decrease in aggregate demand leads to a decrease in prices as businesses try to attract consumers with lower prices. Therefore, inflation is not higher but rather lower during a depression.
3. The employment avenues start shrinking, forcing the unemployment rate to grow fast.
This statement is correct. In a depression, businesses face reduced demand for their products and services, which leads to a decline in production. As a result, businesses may resort to cost-cutting measures, including reducing their workforce. This leads to a shrinking of employment avenues and a rise in the unemployment rate. High unemployment is one of the significant consequences of a depression.
In summary, option 'C' is the correct answer because statements 1 and 3 accurately describe the traits of depression. The low aggregate demand causing a deceleration in activities and the shrinking employment avenues leading to a fast-growing unemployment rate are both characteristics of a depression.
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Which of the following are the traits of depression? 1. An extremely low aggregate demand in the economy causes activities to decelerate.2. Inflation is comparatively higher.3. The employment avenues start shrinking forcing unemployment rate to grow fast.Which of these statements is/are correct?a) 1 and 2 Onlyb) 2 and 3 Onlyc) 1 and 3 Onlyd) All of themCorrect answer is option 'C'. Can you explain this answer?
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