Q. With reference to the business cycle, consider the following statements:
1.A depression is identified by a decline in real GDP of at least 10% in a given year or a severe downturn lasting three or more years.
2.A trough represents the point of maximum economic activity before the economy enters a recovery phase.
Which of the statements given above is/are correct?
Answer: A
Notes:
Explanation:
- A depression is a severe and prolonged recession. Economically, it’s defined by either a decline in real GDP of 10% or more in a year, or a recession lasting three or more years.
- A trough is the lowest point of economic activity, not the point of maximum It marks the end of depression or recession and the beginning of recovery, not the peak.
