Question

Microecon question: what causes unemp rate to increase? decrease? How has the unemp rate varied in our businss cycle?

Answer 1

Cause of unemployment increases is depend upon both the sides , demand side and supply side

the demand side :- in demand side it may be caused by recession, financial crisis and high interest rates.

the supply side:- in supply side frictional unemployment and structural employment play a great role.

Cause of unemployment decrease is increase the supply of skilled labour, promiting the small businesses , providing the priper training to thh workerks etc

The four phases of the business cycle:

1. A peak phase is when business activity reaches a temporary ma imum, unemployment is low, because at this time company/ firm has good amount of labour.

2. A recession phase is a decline in total output, unemployment rises becauseat this time firms are layoff the employees.

3. The trough phase is the bottom of the recession period, unemployment is at its highest, in which companies/ firms already layout and not going to hire employes at this stage even they don't have proper projects.

4. expansion (recovery) phase is when output is increasing, unemployment begins to fall ,here projects are coming to comany and they start hiring the people for job.