What characterizes an economic downturn?

An economic downturn is primarily characterized by a decline in economic activity, which is reflected in several key indicators. Falling Gross Domestic Product (GDP) signifies that the overall production and consumption within an economy are decreasing, indicating reduced economic output. Alongside this, rising unemployment rates suggest that businesses are struggling and may be laying off workers or pausing hiring, leading to a reduction in income and spending power among consumers.

Lower consumer spending is another critical factor during an economic downturn. As individuals face economic uncertainty and a lack of job security, they are less likely to spend money on non-essential goods and services, further exacerbating the downturn. This combination of declining GDP, increasing unemployment, and reduced consumer spending paints a clear picture of an economic downturn and highlights its impact on both businesses and individuals within the economy.

In contrast, the other options reflect positive economic conditions rather than a downturn, where consumer spending and investments would be rising, job opportunities would be increasing, and national income would be on the rise.