Chapter 1, Problem 13P

To determine

Determine:

(a) Overall spending sometimes gets out of line with the economy’s productive capacity
(b) Government policies can change spending

Concept Introduction

Recession: Recession is a condition when the economy declines for at least six months. In a recession, there is a drop in real gross domestic product, income, employment, manufacturing and retail sales. Recession leads to unemployment. As the unemployment rate rises, consumer purchases fall off and businesses go bankrupt. If the recession lasts for a longer period of time, then it becomes a depression.