Question

Whitch economic indicators most strongly suggest that an economy is experiencing the contraction phase of a business cycle. Answer choises shown on image.

Answer 1

Answer: D. Unemployment rates are rising while GDP is falling.

Explanation:

A rising Gross Domestic Product (GDP) and a low unemployment rate are signs that an economy is doing well because it shows that the economy is growing and people have jobs that can give them access to income to spend in the economy.

If Unemployment starts rising therefore and GDP is falling, the economy is not growing but is rather contracting. People increasingly do not have access to income to spend on goods and services and companies are not hiring people because they are unable to sell as much goods and services.