Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the ACCA Certification Exam with interactive quizzes and detailed explanations. Get a head start on your success with our comprehensive study tools.

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

What does a recession indicate about the economy?

A period of rapid growth and investment
A phase of increasing employment rates
A decline in demand and production
A time of stable prices and wages

The correct answer is: A decline in demand and production

A recession indicates a decline in demand and production within the economy. During a recession, economic activity slows down, which leads to various consequences such as reduced consumer spending, lower business investment, and a contraction in production levels. This decline in demand often results in businesses cutting back on output, which may lead to layoffs and higher unemployment rates. Overall, the characteristics of a recession include shrinking GDP, increased inventory levels as sales slow, and a pervasive sense of uncertainty affecting both consumers and businesses. This contextual understanding helps clarify why the indication of a recession focuses on a decline in demand and production rather than growth, stability, or increasing employment.