1. Why is there a decrease in production during a recession?
During recession, everyone is intent on saving money.
There is a decrease in production because of the following instances:
1) decrease in number of workers. Company tend to save money by firing their workers.
2) decrease in demand of their products. Most consumers prefer to save their money and buy only necessities.
3) increase in prices of raw materials. Raw materials of their products tend to cost more during recession.
2. Why is the dollar worth comparatively less during inflation?
Inflation is the rate wherein the prices of goods and services are increasing while the purchasing power of the currency is decreasing. The dollar worth is comparatively less during inflation because its time value has decreased.
