During a recession, what generally happens to the level of economic activity?

During a recession, economic activity typically decreases due to a range of factors that stem from reduced consumer and business confidence. When consumers are uncertain about their financial futures, they tend to spend less, which can lead to a decline in demand for goods and services. This drop in demand forces businesses to reduce production, cut costs, and may result in layoffs or reduced hiring, which further contributes to the downward spiral of economic activity.

In addition, investment by businesses often declines during a recession as companies become more cautious and prioritize maintaining cash flow over expansion. This lack of investment can further inhibit economic growth and prolong the downturn. The decrease in economic activity during a recession is marked by reduced gross domestic product (GDP), lower retail sales, and diminished industrial output, all indicative of a struggling economy.

While some businesses may experience fluctuations in activity depending on their industry, the overarching trend during a recession is a considerable decrease in overall economic activity. This context helps clarify why the answer indicating a decrease is accurate in describing the general impact of a recession on the economy.