Explanation:
Resilient labor markets, characterized by low unemployment and sustained employment, played a crucial role by supporting household incomes. This provided a buffer against the erosion of purchasing power due to rising prices, helping to maintain consumption levels and prevent a sharp contraction in economic activity that could have triggered a recession.
A is incorrect: While wage growth can contribute to inflation, the text focuses on how sustained employment supported consumption.
C is incorrect: While increased production capacity can help in the long run, the text emphasizes the role of labor markets in supporting demand.
D is incorrect: Strong labor markets did not force more aggressive tightening; rather, they provided a cushion that allowed economies to withstand the tightening.
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Q.6367 Which of the following best characterizes the role of resilient labor markets in mitigating the risk of a global recession following the 2022 inflationary surge?
A
Strong labor markets directly countered inflationary pressures by suppressing wage growth.
B
Sustained employment and household incomes provided a buffer for consumption, offsetting the negative impacts of rising prices.
C
High labor force participation rates led to increased production capacity, easing supply chain bottlenecks.
D
Low unemployment rates forced central banks to adopt more aggressive monetary tightening policies to curb wage-price spirals.