When production is very high but demand is very low, it can lead to:

When production is very high but demand is very low, it can lead to:

a. a recession

b. a recovery

c. prosperity

d. the peak

Answer: a. a recession

It implies that when production capacity is very high, and utilization of goods and services is very low, then one faces a recession. Economy downturn is referred to as a recession because it the period of time when there is low economic activity and reduction in key fundamental activities such as spending, investment and employment. This pushes business organisations into a director where they produce goods in large quantities, but there few people willing to buy the goods- leading to overstocking. Therefore, they could be compelled to bring down output rates, dismiss employees, and scale down their investments seriously deepening the pace of the economic slowdown. When the fresh supply exceeds the demand, it a goes round in circles; this causes an extended time of economic decrease known as the recession.