If the GDP has decreased in the last two years, which of the following is likely true?
A) The economy is in a recession and unemployment rate is decreasing.
B) The economy is in a recession and the unemployment rate is increasing.
C) The economy is in a recovery phase and the unemployment rate is decreasing.
D) The economy is in a contraction phase and the CPI is decreasing.

Question

Quizplus · Accepted Answer

A decrease in GDP over a two-year period indicates a recession. During a recession, it is likely that the unemployment rate is increasing, as businesses are not hiring as many workers due to the decrease in economic activity. Option A is incorrect because the unemployment rate is not likely to be decreasing during a recession. Option C is incorrect because recovery phases usually involve an increase in GDP, not a decrease. Option D is incorrect because a decrease in the CPI (Consumer Price Index) indicates deflation, which is not necessarily correlated with a decrease in GDP.

If the GDP Has Decreased in the Last Two Years