Which of the following explains why the rate of unemployment continues to rise once a recession is over?
A)Discouraged workers leave the labour force.
B)Wages rise faster than productivity increases so firms are reluctant to hire workers.
C)Firms are operating below capacity for some time after the recession is finished.
D)The unemployment rate does not continue to rise after a recession is over.

Question

Quizplus · Accepted Answer

Firms often continue to operate below their full capacity for a period after a recession has ended because they are cautious about the economic recovery and uncertain about future demand for their products. This leads to a slower pace in hiring, contributing to the continued rise in unemployment even after the recession technically ends.

Which of the Following Explains Why the Rate of Unemployment