Which of the following is likely to occur during economic downturns?
A) People tend to spend more on luxury goods
B) Consumption of necessary goods decline
C) Long term credit is available at concessional rates of interest
D) The purchasing power of the people declines
E) The level of investment in the economy rises

Question

Quizplus · Accepted Answer

During economic downturns, unemployment tends to increase and income levels decline, which leads to a decrease in the purchasing power of the people. As a result, people tend to spend less in general, and consumption of necessary goods may also decline as people try to save money.

Answer: B
 During economic downturns, people tend to cut back on their spending, particularly on non-essential or luxury items. As a result, consumption of necessary goods may also decline.

Which of the Following Is Likely to Occur During Economic