SAT Subject US History Practice Question 407: Answer and Explanation
28. Which of the following statements best defines the economic term "depression"?
A. A sharp drop in business activity along with rising unemployment
B. A large influx of foreign capital
C. An unpredicted increase in exports with a decline in imports
D. A lowering of interest rates
E. The laws of supply and demand
Correct Answer: A
An economic depression occurs when prices and wages fall and businesses cut back on the number of employees.