Which industries are most affected by recession in terms of production and employment?

The correct response identifies capital goods and consumer durable goods as the industries most affected by recession in terms of production and employment. During a recession, economic uncertainty typically leads consumers and businesses to cut back on spending.

Capital goods, which include machinery and equipment used in production, experience a significant reduction in demand because businesses postpone or reduce investment in new capital. This decline directly impacts the production capacities of industries reliant on capital goods, resulting in layoffs and reduced production levels.

Similarly, consumer durable goods, such as appliances and vehicles, are affected because they are typically higher-cost items that consumers may choose to defer purchasing during economic downturns. As consumers prioritize essential spending over major purchases, the demand for these goods falls, leading to increased inventory levels, reduced production, and consequently job losses in the manufacturing and sales sectors associated with these goods.

In contrast, other sectors like consumer non-durable goods (which includes necessities such as food and household items) and certain service industries tend to be less sensitive to economic cycles. They may experience slower growth but generally maintain steadier demand even during downturns, as people still need basic goods and essential services. Thus, understanding the cyclical behavior of different industries highlights why capital goods and consumer durable goods are particularly vulnerable during recessions