Question

Which best describes the nature of cause and effect in the context of the business cycle?

Consumers spend less, causing worker layoffs.
Demand falls, causing production to stay at its peak.
A recession begins, causing consumers to spend more.
Goods are overproduced, causing a surplus in jobs.

Answer 1

"Consumers spend less, causing worker layoffs."

Explanation: Lower consumer spending reduces demand for goods and services, so firms cut production and lay off workers — a typical causal chain in a downturn of the business cycle.