Which of the following statements is the most accurate about the behaviour of the unemployment rate in Canada?
A) Both the cyclical behaviour of the unemployment rate and the trend behaviour of the unemployment rate are well explained by changes in the level of aggregate economic activity.
B) The cyclical behaviour of the unemployment rate is well explained by changes in the level of aggregate economic activity, and the trend behaviour of the unemployment rate is well explained by demographic factors.
C) the cyclical behaviour of the unemployment rate is well explained by demographic factors, and the trend behaviour of the unemployment rate is well explained by changes in the level of aggregate economic activity.
D) Both the cyclical behaviour of the unemployment rate and the trend behaviour of the unemployment rate are well explained by demographic factors.
E) Both the cyclical behaviour of the unemployment rate and the trend behaviour of the unemployment rate are not well explained by demographic factors.

Question

Quizplus · Accepted Answer

The cyclical behaviour of the unemployment rate is strongly influenced by changes in the level of aggregate economic activity, as it tends to increase during economic downturns and decrease during economic expansions. On the other hand, the trend behaviour of the unemployment rate is influenced by demographic factors such as population growth, changes in labour force participation, and aging. These factors result in a long-term upward trend in the unemployment rate that persists even during periods of economic growth. Therefore, statement B correctly identifies the main drivers of both the cyclical and trend behaviour of the unemployment rate in Canada.

Which of the Following Statements Is the Most Accurate About