When the economy goes into a recession, real GDP _ and unemployment _

Business Dec 23, 2020

When the economy goes into a recession, real GDP _____ and unemployment _____.

A. rises, rises

B. rises, falls

C. falls, rises

D. falls, falls

Expert Solution

The answer is C).

An economy is in a recession when the economy is producing below the potential output level for a sustained period of time. A recession therefore represents a period of lower-than-normal economic activity, i.e., real GDP will fall. Since there is a negative relationship between output and unemployment, unemployment will rise during a recession.

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