Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What would a decrease in a country’s Gross Domestic Product (GDP) signify?

1. An increase in unemployment rates

2. Stable economic conditions

3. An expansion of the construction sector

4. A decrease in inflation rates

The correct answer is: An increase in unemployment rates

A decrease in a country’s Gross Domestic Product (GDP) signifies an economic contraction, which typically leads to higher unemployment rates. When GDP declines, it indicates that the production of goods and services in the economy is decreasing, often resulting in businesses earning less revenue. In response, companies may cut costs by reducing their workforce, leading to layoffs and higher unemployment. A declining GDP often reflects negative economic trends such as reduced consumer spending, lower business investment, and overall diminished economic activity. In contrast, stable economic conditions would generally be associated with steady or growing GDP figures rather than a decrease. Similarly, an expansion of the construction sector typically correlates with economic growth, not a decline in GDP. Lastly, a decrease in inflation rates does not necessarily follow a drop in GDP; inflation can react differently based on numerous factors, including monetary policy and consumer demand dynamics. Thus, relating a decrease in GDP primarily to an increase in unemployment rates is well-founded in economic principles.