Question

Which of the following statements best defines the economic term "depression"?

• A. A sharp drop in business activity along with rising unemployment
• B. A large influx of foreign capital
• C. An unpredicted increase in exports with a decline in imports
• D. A lowering of interest rates
• E. The laws of supply and demand

Answer 1

The correct option is A A sharp drop in business activity along with rising unemployment

Depression is defined as a severe and prolonged recession. A recession is a situation of declining economic activity. Declining economic activity is characterized by falling output and employment levels. Generally, when an economy continues to suffer recession for two or more quarters, it is called depression.