Assume that the economy has just come out of a severe recession, and growth is booming....

Assume that the economy has just come out of a severe recession, and growth is booming. The labor force is growing because many unemployed people who thought they could not find a job during the recession now think they can and have started to apply for work. But, not all of these people find a job immediately. What do you think will happen to the unemployment rate this month?

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Expert Solution

Recession is a economic situation wherein the economic activity falls ,along with it unemployment also rises. However once the economy moves out of this phase, growth is acheived and is moving in the phase of economic recovery and boom, consumer spending increases and economic activity stadt to grow leading to money money in circulation and dwmand for jobs. During boom, inflation as well as employment is likely to rise. However not all will find jobs. After a economy moves out of recession, demand for jobs do rise however at times the jobs qualification demanded doesnt match with job skills possessed by the workers, thus leading to structural unemployment. Frictional unemployment is also the case in a economic boom. Also inflexible labour market condition can hamper the job market.

However as economy start to gain its pace, unemployment will decrease however the rate of decrease might not be satisfactory if the above causes prevail.

Rahul Sunny answered 2 years ago

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