Which of the following situations is more likely to occur during a bad economy?

• A. Increased consumer spending
• B. Higher unemployment rates
• C. Lower interest rates due to strong demand for loans
• D. Rising business investments

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the characteristics of a bad economy, which typically includes reduced economic activity, lower consumer confidence, and decreased demand for goods and services.
2. Step 2: Analyze the option 'Increased consumer spending' — in a bad economy, consumers usually spend less due to uncertainty and lower income, so this is less likely.
3. Step 3: Consider 'Higher unemployment rates' — during economic downturns, businesses often reduce their workforce due to lower demand, making higher unemployment rates more likely.
4. Step 4: Evaluate 'Lower interest rates due to strong demand for loans' — in a bad economy, demand for loans usually decreases as businesses and consumers are more cautious, and central banks may lower interest rates to stimulate borrowing, but the key phrase 'strong demand for loans' is unlikely.
5. Step 5: Assess 'Rising business investments' — businesses tend to cut back on investments during bad economic times due to uncertainty and reduced profits, so this is less likely.