Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Which of the following factors can lead to a recovery in the economy?

1. Reduced technological investments

2. Technological innovations

3. Increased layoffs by corporations

4. Higher interest rates

The correct answer is: Technological innovations

Technological innovations play a critical role in economic recovery as they can lead to increased productivity, efficiency, and competitiveness within various industries. When new technologies are developed or adopted, they often streamline processes, reduce costs, and can even create new markets or opportunities. This can result in job creation as businesses expand and invest in growth, ultimately boosting consumer confidence and spending. In contrast, reduced technological investments may stifle growth and hinder innovation, while increased layoffs by corporations typically indicate economic contraction and diminish consumer spending power. Similarly, higher interest rates tend to discourage borrowing and spending, which can further slow down economic activity. Therefore, technological innovations are a key driver for revitalizing the economy, making it the most critical factor among the options provided.