Certification in Supplier Diversity Practice Exam

What do economy-related terms 'expansion' and 'recession' refer to?

1. Phases of the business cycle

2. Types of market structures

3. Classification of suppliers

4. Forms of government intervention

The correct answer is: Phases of the business cycle

The terms 'expansion' and 'recession' are indeed phases of the business cycle. In economic terms, expansion refers to a phase where economic activity is increasing, characterized by rising GDP, employment, and consumer spending. It indicates a healthy and growing economy. Recession, on the other hand, indicates a decline in economic activity, typically marked by a decrease in GDP, rising unemployment, and reduced consumer spending. This phase reflects a contraction in the economy where businesses may cut back on production and investment. Understanding these phases is crucial for businesses and policymakers, as they can influence decisions related to investment, staffing, and economic policy. Each phase can significantly impact supplier diversity initiatives, as businesses may adjust their engagement with diverse suppliers based on economic conditions. The other options, such as types of market structures, classification of suppliers, and forms of government intervention, do not accurately capture the meaning of expansion and recession, which are specifically tied to the cyclical nature of economic activity rather than structural characteristics or classifications within the market.