Question

Which firm is likely to see its profits reduced the most in a recession: an automobile producer, a manufacturer of boots and shoes, or a janitorial service? Which is likely to see its profits reduced the least? Explain.

Answer 1

Automobile producer would see profit reduced the most and janitorial services would be least affected.

Explanation:

Recession is one of the phases of the trade cycle. In this phase of the trade cycle, there is downfall in the production, consumption, investment and saving in the economy. The growth rate of the economy sees a downfall in this phase.

Among the examples given here, automobile producer is the firm which would be one of the most affected company during the time of recession because it is not something essential but luxury.