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

• A. Frequent business closures and high interest rates
• B. Increasing poverty and declining consumer spending
• C. Low unemployment rates and rising incomes
• D. High inflation and falling production

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the characteristics of a strong economy. A strong economy typically features low unemployment rates, rising incomes, increased consumer spending, and stable or moderate inflation.
2. Step 2: Analyze each option in the context of these characteristics. For example, frequent business closures and high interest rates usually indicate economic weakness or recession, not strength.
3. Step 3: Consider increasing poverty and declining consumer spending. These are signs of economic downturn or recession, which contradict the idea of a strong economy.
4. Step 4: Evaluate low unemployment rates and rising incomes. These are classic indicators of a strong economy because more people have jobs and higher incomes, leading to greater spending and economic growth.
5. Step 5: Assess high inflation and falling production. High inflation can erode purchasing power, and falling production suggests reduced economic output, both of which are not typical of a strong economy.