Negative growth causes unemployment

Steps:

• Define negative economic growth as a decline in GDP, signaling recession.
• Recall that recessions reduce business output and hiring.
• Link reduced output to layoffs and job losses.
• Identify higher unemployment as a direct cost from these effects.

Why C is correct:

• Negative growth shrinks production, leading to workforce reductions; Okun's law quantifies this, showing a 2% GDP drop correlates with 1% unemployment rise.

Why the others are wrong:

• A: Balance of payments relates to trade, not directly to growth contraction.
• B: Negative growth typically causes deflation or low inflation, not higher.
• D: Pollution often decreases with reduced industrial activity in recessions.

Final answer: C