Question

Suppose the economy is shrinking. This means that total output is -

and total income is.
decreasing, increasing
decreasing, decreasing
increasing, increasing

Answer 1

A shrinking economy basically refers to a recessionary phase in economy in which both the total output or GDP and the National Income decrease.Hence,the answer in this case would be second option mentioned in the answer options or list or decreasing,decreasing.

Step-by-step explanation:

• During the shrinking phase of an economy,the overall output or the GDP level is stagnant or declining due to a comprehensive economic downturn.
• A shrinking economy is commonly characterized by a widespread stagnancy or downfall in the aggregate consumer/buyer demand in the economy, aggregate consumption expenditure by the consumers or buyers,overall production of goods and services,total or overall employment level,aggregate capital or business investments by companies and commercial organisations,different public expenditures and so forth.
• Therefore,the major components or determinants of Aggregate Demand and Aggregate Supply in the economy are either stagnant or decreasing creating a comprehensive economic downturn.Now,since the overall production of goods and services are also falling or stagnant,the total output or GDP level will experience the same impact and so does the National Income.