An 'economic contraction' begins with a/an ________ in spending by firms on capital goods and a/an ________ in spending on durable goods by households.
A)increase; decrease
B)increase; increase
C)decrease; increase
D)decrease; decrease

Question

Quizplus · Accepted Answer

An economic contraction is a period of economic decline characterized by a decrease in gross domestic product (GDP) and employment. This decline typically begins with a decrease in spending by firms on capital goods, such as machinery and equipment, as they become hesitant to invest in new projects due to uncertainty about future economic conditions. This decrease in spending is followed by a decrease in spending on durable goods by households, as they become more cautious about making large purchases. Together, these decreases in spending contribute to the overall decline in economic activity that characterizes an economic contraction.

An 'Economic Contraction' Begins with A/an ________ in Spending by Firms