A recession begins with a(n)________ in spending by firms on capital goods and a(n)________ in spending on durable goods by households.

Question

Quizplus · Accepted Answer

A recession is a period of significant decline in economic activity, and it is typically characterized by a decrease in spending by both firms and households. Firms tend to reduce their spending on capital goods such as machinery, equipment, and buildings as they become less confident about future demand and profitability. Similarly, households tend to reduce their spending on durable goods such as cars, appliances, and furniture as they become more cautious about their finances and job security. Therefore, the correct answer is D, which indicates a decrease in spending by both firms and households.

A Recession Begins with A(n)________ in Spending by Firms on Capital