Why does unemployment tend to change when the level of output changes?
A)Persons wish to buy things, and if output falls, people need to work less to earn the income to buy the smaller output.
B)Labor is an input, and if output falls, employers need fewer workers to make it, so the employment falls.
C)As output rises, more people are more interested in buying goods and services, and so these people work more to obtain the income needed to buy things.
D)Persons face the option of buying or working, so that when they do more of one, the other necessarily falls.
E)When companies replace workers with machines, output rises and people take more vacation time prior to returning to work.

Question

Quizplus · Accepted Answer

Unemployment tends to change when the level of output changes because labor is an input, and if output falls, employers need fewer workers to make it, so the employment falls. The inverse is also true - if output rises, employers need more workers to produce the additional output, so employment rises.

Why Does Unemployment Tend to Change When the Level of Output