Question

discuss the impact of economic recessions and expansions on normal goods

Answer 1

Answer) We will discuss impact of economic recessions on normal goods first,as recessions happen unemployment increases and people will have less purchasing power,thereby demand for these normal goods will decrease which will lead to surplus production leading to decline in prices,whereas during expansions,people have more purchasing power,unemployment is less leading to more demand for normal goods which means shortage of goods leading to increase in prices of these goods.One good example is of automobiles,during recession we see demand of automobiles go down very quickly and manufacturers have to give lot of discounts,however in times of boom demand is much higher and price of automobiles shoot up.

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