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Which of the following are the economy traits of the cycle of recovery?
1. An upturn in aggregate demand which has to be accompanied by an increase in the level of production.
2. Production process expands and new investments become attractive.
3. Inflation also moves downward making borrowing cheaper for investors.
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 'A'. Can you explain this answer?
Most Upvoted Answer
Which of the following are the economy traits of the cycle of recover...
The correct answer is option 'A': 1 and 2 Only.
Explanation:
1. An upturn in aggregate demand which has to be accompanied by an increase in the level of production:
During the cycle of recovery, one of the key economy traits is an upturn in aggregate demand. This means that consumers and businesses are willing to spend more on goods and services. As a result, there is an increase in the level of production to meet this higher demand. This can be seen in various sectors of the economy, such as manufacturing, services, and construction, where production activities expand to meet the increased demand.
2. Production process expands and new investments become attractive:
With the upturn in aggregate demand, businesses start to expand their production process. This expansion can include increasing the capacity of existing facilities, hiring more workers, and investing in new machinery and equipment. The expansion of production not only helps to meet the increased demand but also creates new job opportunities and stimulates economic growth. Additionally, new investments become attractive during this period as businesses see the potential for higher returns due to increased consumer spending.
3. Inflation also moves downward making borrowing cheaper for investors:
The statement that inflation moves downward during the cycle of recovery is not correct. Inflation is a general increase in prices over time, and during the recovery phase, it is more likely that inflation will increase rather than decrease. As the economy recovers, demand for goods and services increases, which can lead to upward pressure on prices. This can be seen in rising consumer prices and higher input costs for businesses.
Therefore, the correct answer is option 'A': 1 and 2 Only, as statement 3 is incorrect.
Explanation:
1. An upturn in aggregate demand which has to be accompanied by an increase in the level of production:
During the cycle of recovery, one of the key economy traits is an upturn in aggregate demand. This means that consumers and businesses are willing to spend more on goods and services. As a result, there is an increase in the level of production to meet this higher demand. This can be seen in various sectors of the economy, such as manufacturing, services, and construction, where production activities expand to meet the increased demand.
2. Production process expands and new investments become attractive:
With the upturn in aggregate demand, businesses start to expand their production process. This expansion can include increasing the capacity of existing facilities, hiring more workers, and investing in new machinery and equipment. The expansion of production not only helps to meet the increased demand but also creates new job opportunities and stimulates economic growth. Additionally, new investments become attractive during this period as businesses see the potential for higher returns due to increased consumer spending.
3. Inflation also moves downward making borrowing cheaper for investors:
The statement that inflation moves downward during the cycle of recovery is not correct. Inflation is a general increase in prices over time, and during the recovery phase, it is more likely that inflation will increase rather than decrease. As the economy recovers, demand for goods and services increases, which can lead to upward pressure on prices. This can be seen in rising consumer prices and higher input costs for businesses.
Therefore, the correct answer is option 'A': 1 and 2 Only, as statement 3 is incorrect.
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Which of the following are the economy traits of the cycle of recover...
The business cycle of recovery may show the following economy traits:
- (i) an upturn in aggregate (total) demand which has to be accompanied by an increase in the level of production;
- (ii) production process expands and new investments become attractive;
- (iii) as demand goes upward, inflation also moves upward making borrowing cheaper for investors;
- (iv) with an upturn in production, new employment avenues are created and the unemployment rate starts declining, etc.
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Which of the following are the economy traits of the cycle of recovery? 1. An upturn in aggregate demand which has to be accompanied by an increase in the level of production.2. Production process expands and new investments become attractive.3. Inflation also moves downward making borrowing cheaper for investors.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 'A'. Can you explain this answer?
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