Chapter 1R, Problem 6MCQ

To determine

The question requires us to determine the economic variable which is consistent with the falling output in an economy.

Explanation of Solution

A recession is an economic slowdown. In a recession, the market faces the following situations:

• a low production level of goods and services, 
• high unemployment 
• low demand for goods and services
• the low general price level of goods and services
• low-income level (or low level of wages in the labor market)

During the recession, output, economic growth, wages, and price levels fall in the market, while unemployment increases in the economy.

Therefore, falling output in an economy is consistent with recession.

Option “a” is correct.