Which event most likely explains renewed demand in a recovery period?

• A. An increase in consumer confidence leading to higher spending
• B. A decrease in government investment
• C. A contraction in the money supply
• D. A rise in unemployment rates

Answer: (A)

Verified step by step guidance

1. Understand the concept of demand in microeconomics: Demand refers to the quantity of a good or service that consumers are willing and able to purchase at various prices during a given period.
2. Recognize that during a recovery period, the economy is improving after a downturn, so factors that increase consumers' willingness or ability to spend will likely increase demand.
3. Analyze each option in terms of its effect on consumer spending and demand: an increase in consumer confidence typically encourages more spending, while a decrease in government investment, contraction in money supply, or rise in unemployment generally reduce spending.
4. Identify that an increase in consumer confidence means consumers feel more optimistic about their financial situation and future income, which leads to higher spending and thus renewed demand.
5. Conclude that among the options, the event that most likely explains renewed demand in a recovery period is an increase in consumer confidence leading to higher spending.