Which of the following describes the downturn period of a business cycle?

The downturn period of a business cycle, often referred to as a recession, is characterized by several significant economic indicators that align with increased unemployment and reduced economic activity. During this phase, it is common to observe falling interest rates as central banks attempt to stimulate the economy by making borrowing cheaper. In addition, as consumer and business confidence decreases, lending activities generally decline because individuals and businesses are less inclined to take on loans for investment or consumption.

In this context, increased unemployment occurs as companies may reduce their workforce to cut costs in response to decreasing demand for goods and services. This combination of falling interest rates, increased unemployment, and lower lending activities captures the essential traits of a downturn in the business cycle, making it the most accurate depiction among the options provided.

Other options feature economic conditions that do not align with those typical of a downturn, such as rising stock prices, stable interest rates, or high inflation, which are associated with different phases of the business cycle, rather than a downturn.