In the context of Indian economy, consider the following pairs: Term Most Appropriate Description1. Melt Down Fall in Stock Prices2. Recession Fall in Growth Rate3. Slow Down Fall in GDP Which of the pairs given above is/are correctly matched?
✓ Correct answer: a) 1 only
ExplanationPair 1 is correctly matched: A meltdown, typically triggered by a black swan event, leads to a rapid loss of finan- cial asset value and liquidity crises, as seen in India’s Sensex drop from 20,000 in 2008 to 10,000 in 2009. Pair 2 is incorrectly matched: A recession is a broader econom- ic phenomenon characterized by a significant decline in econom- ic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.While a fall in the growth rate can be a precursor to or associated with a recession, it’s not the definition of a recession itself.A fall in the growth rate means the economy is still growing, but at a slower pace.Pair 3 is incorrectly matched: An economic slowdown refers to a period of slower economic growth, but not necessarily a de- cline in GDP.GDP is still increasing (positive growth), but at a reduced rate.A “fall” in GDP signifies a contraction in the economy, which is closer to the definition of a recession.118
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