Why does unemployment rise during recessions? I. because of labor reallocation among affected industries in response to real economic shocks II. because wages do not fall as fast as prices, and firms cannot afford to employ as many workers III. because of increases in aggregate demand

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Unemployment rises during recessions primarily due to labor reallocation and wage rigidity. Labor reallocation occurs as industries adjust to economic shocks, and wage rigidity happens because wages do not fall as quickly as prices, leading firms to reduce their workforce. Increases in aggregate demand typically reduce unemployment, not increase it.

Why Does Unemployment Rise During Recessions? I