The effect of a recession on a company like General Motors Corporation is such that
A)sales decline more sharply for General Motors as compared to firms that do not produce durable goods.
B)profits fall less sharply as compared to firms that do not produce durable goods.
C)the decline in sales is more short-lived as compared to firms that do not produce durable goods.
D)there is no difference in the impact of the recession on its profits as compared to firms that do not produce durable goods.

Question

Quizplus · Accepted Answer

Generally, during an economic recession, consumer spending decreases, and as a result, sales of durable goods such as cars, decline sharply. Since General Motors produces durable goods, its sales would be more adversely affected compared to firms that do not produce durable goods. Therefore, option A is the correct answer. Option B is incorrect because if sales decline, profits will also fall, albeit at different rates for different firms. Option C is incorrect because the length of the decline in sales varies depending on various factors, such as the severity and length of the recession. Option D is incorrect because firms that do not produce durable goods are not affected in the same way as General Motors or other firms in the automobile industry.

The Effect of a Recession on a Company Like General