Question

Match the economic scenario to the relevant characteristics. Increase in savings increase in unemployment more demand for funds among borrowers increase in government borrowing increase in price of products economic recession economic expansion

Answer 1

Economic expansion

• Increase in savings

The economy is expanding which means that people have access to higher wages. This will enable them to save more.

• More demand for funds among borrowers

As the economy is expanding, people will borrow to consume more as well as to invest which will lead to a higher demand for borrowed funds.

• Increase in price of products

With more people able to afford goods and services, prices will increase as there is now more demand for those goods.

Economic recession

• Increase in unemployment

With the economy shrinking, companies will be making less profit and will have to layoff workers to reduce their costs.

• Increase in government borrowing

In a recession, the Government will have to spend more to prop up the economy like the US Government did during this pandemic by providing stimulus packages. This spending is supported by borrowing.