Question

Which best describes how a recession develops as demand and production decrease?

The answer is C: The recession feeds on itself.

Answer 1

An economic recession is a process that usually has a triggering event, but then grows as a domino effect. For example, we can cite the collapse of Lehman Brothers Bank in the 2008 crisis as the initial event of what became a major crisis and that drove the developed world into recession.

All this happens because of the reversal of expectations. When a serious event happens, all other economic agents revert their expectations about the economy and seek to protect their business. The companies stop investing, the consumers reduce to the maximum their consumption. All seek to save until the crisis subsides.

The consequence is that the productive activity falls and the economy stagnates, because the recession self feeds.

Answer 2

The recession feeds on itself describes how a recession develops as demand and production decrease.

The term recession is used denote economic situation in which the economy stops growing and goes into reverse, consumers spend less , there are fewer jobs ...Usually, recessions correct themselves when interest rates go down.