Recession Reduces Household Purchasing Power

Steps:

• Define recession as a period of economic decline with falling GDP, rising unemployment, and reduced production.
• Link recession to income effects: job losses and wage cuts decrease household earnings.
• Connect to standards of living: this lowers ability to afford goods and services, measured by real income or consumption.
• Evaluate choices: identify which directly explains the fall in living standards via reduced affordability.

Why B is correct:

• Purchasing power is real income adjusted for prices; in recession, falling incomes amid stable or rising prices (due to demand drop) reduce what households can buy, directly lowering living standards per economic definitions.

Why the others are wrong:

• A: Governments typically cut taxes or increase spending in recessions, not raise taxes, per Keynesian policy.
• C: Currency value often depreciates in recessions due to lower interest rates and investor flight.
• D: Recessions usually prompt emigration or reduced immigration from job scarcity, not a rise.

Final answer: B