Changes in the unemployment rate over the business cycle are most likely caused by:

Question

Quizplus · Accepted Answer

Unemployment rate is closely related to the overall demand for goods and services in the economy. During a recession, when aggregate demand falls, firms may need to lay off workers in order to cut costs. As demand picks up during the expansion phase of the business cycle, firms would need to hire workers again to meet the higher demand. Therefore, changes in the unemployment rate are most likely caused by changes in aggregate demand.

Changes in the Unemployment Rate Over the Business Cycle Are