Homework Answers
Since a recession is time period of the economy in which the price level is quite low and demand for goods and services are also very low. So the unemployment rate is very high, therefore the purchasing power is very low.
Hence during contraction or recession in the economy there will be an increase in the saving, a decrease in consumer spending and a decrease in the planned investment.
But when the recession is over, then there will be more expenditure by the government as well as by the firms. Since people start demanding more goods and services, therefore production of goods and services will increase. So for doing this firms will start borrowing more for investment.
Hence investment will increase.
Hence when recession ends firm will start borrowing more.
Hence option B is the correct answer.
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