What is the increase in unemployment above equilibrium unemployment caused by a fall in aggregate demand...

What is the increase in unemployment above equilibrium unemployment caused by a fall in aggregate demand associated with the business cycle?

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Expert Solution

. Aggregate demand means the total demand of the economy and it includes the total demand of the household sector industrial sector Government and rest of the world therefore with the fall in aggregate demand increases the rate of unemployment in the economy because the aggregate demand associated with the aggregate supply in an economy if aggregate demand decreases then it means there is a decrease in the aggregate supply.
Unemployment is a situation where all the resources are not fully utilised and underemployment equilibrium is a situation which is existing below the full employment equilibrium where aggregate demand is less than the new aggregate demand for the actual aggregate demand lies on the underemployment equilibrium.
Increase in unemployment above equilibrium unemployment is caused by a fall in aggregate demand because aggregate demand of all the sectors decreases because of the decrease in the aggregate supply it is a common phenomenon in the economy where all the things are based on the two forces that are demand and supply or the aggregate demand and aggregate supply so this is the only reason the full employment and underemployment equilibrium situation are also based on the aggregate demand and aggregate supply.

Rahul Sunny answered 4 weeks ago

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