Question

Suppose that many auto and steel plants close in a country. Thousands of workers lose their jobs in a short period. If the country has been enjoying prosperous times, it may now be headed into what phase of the business cycle? Describe other conditions that might begin to occur.

Answer 1

The country is headed for the CONTRACTION PHASE OF THE BUSINESS CYCLE. When the contraction turns to negative it is called RECESSION.
During recession, the economy will experince mass layoffs of workers and unemployment level will increase. At this point economic growth will be considerable weaken and the GDP growth will be under 2%. Stocks will enter bear market and investors will begin to sell their shares.