Which of the following situations is more likely to occur in a strong economy?

• A. High inflation and declining purchasing power
• B. Low unemployment rates and rising incomes
• C. Decreased consumer spending and investment
• D. Increasing business closures and layoffs

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the characteristics of a strong economy. Typically, a strong economy is marked by robust economic growth, low unemployment, rising incomes, and increased consumer and business confidence.
2. Step 2: Analyze each option in the context of a strong economy. For example, high inflation and declining purchasing power usually indicate economic problems, not strength.
3. Step 3: Consider low unemployment rates and rising incomes. These are classic indicators of a strong economy because more people have jobs and higher incomes, which boosts spending and economic activity.
4. Step 4: Evaluate decreased consumer spending and investment. This scenario suggests economic weakness, as consumers and businesses are less confident and less willing to spend or invest.
5. Step 5: Look at increasing business closures and layoffs. This also signals economic trouble, as companies are failing and unemployment is rising, which contradicts the idea of a strong economy.