Expectations of an economic downturn will most likely produce a recession if businesses:
A) reduce investment spending and households reduce their saving.
B) reduce investment spending and households increase their saving.
C) increase investment spending and households reduce their saving.
D) increase investment spending and households increase their saving.

Question

Quizplus · Accepted Answer

Expectations of an economic downturn can lead to a recession if businesses reduce investment spending due to anticipated lower future profits, and households increase their saving in anticipation of tougher economic times ahead. This combination reduces overall demand in the economy, potentially triggering or exacerbating a recession.

Expectations of an Economic Downturn Will Most Likely Produce a Recession