Future Business Leaders of America (FBLA) Business Management Practice Test

What characterizes a depression?

1. Unemployment is low and wages are competitive.

2. Some workers are laid off as businesses cut production.

3. Many workers are laid off and wages and benefits are less than desirable.

4. Businesses are hiring at high wages.

The correct answer is: Many workers are laid off and wages and benefits are less than desirable.

C is the correct answer because a depression is defined by a significant decline in economic activity across the economy, which usually leads to severe unemployment levels. During a depression, many workers find themselves laid off as businesses struggle to survive and often cut back production dramatically. This high rate of unemployment, coupled with a lack of demand for labor, typically results in lower wages and diminished benefits for those who are still employed. This scenario starkly contrasts with periods of economic stability or growth, where unemployment rates are low, businesses are hiring, and wages tend to be competitive. The other options describe scenarios that do not align with the characteristics of a depression. For example, periods of low unemployment and competitive wages are typical of economic expansion rather than contraction. Similarly, having some workers laid off or businesses hiring at high wages would indicate a more stable economy rather than the widespread job loss and wage suppression that defines a depression.