Question

explain in what ways is unemployment impacted by the phases of the business cycle?

Answer 1

As we know, business cycle shows the periods of economic boom and economic bust, during the economic boom the GDP of the country increases that implies the country enjoys the higher growth rate, and when the country enjoys the higher growth rate it means productive units in the economy are employing more and more labours, so we can say that unemployment rate goes down during the period of economic boom. On the other side, during the period of economic bust, the growth rate of the countries goes down that implies there is a fall in the GDP of the country as compared to the previous levels of GDP that implies many productive units are firing the workers due to the weaker aggregate demand, so we can say that, during the period of economic bust unemployment rate increases.