Q. Consider the following statements regarding the traits of “recession”:
1. General rise in demand.
2. Inflation remains higher and no signs of going down.
3. Employment rate falls.
Which of the statements above given is/are correct?

[A] 1 only

[B] 1 and 2 only

[C] 3 only

[D] 1, 2 and 3

Answer: C
  • Recession is somewhat similar to the phase of ‘depression’ — we may call it a mild form of depression — fatal for economies as this may lead to depression if not handled with care and in time.
  • The financial crises which followed the US ‘sub-prime crisis’ in almost the whole Euro-American economies has basically brought in ‘severe recessionary’ trends there.
  • Major traits of recession, to a great extent, are similar to that of depression – ‘may be summed up as follows:
  • There is a general fall in demand as economic activities take a downturn;
  • Inflation remains lower or/and shows further signs of falling down;
  • employment rate falls/unemployment rate grows;
  • Industries resort to ‘price cuts’ to sustain their business.

Source: Source