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Chapter 8: "Q.19" (page 214)

When would you expect cyclical unemployment to be rising? Falling?

Short Answer

Expert verified

Increase during recession and fall during expansion.

Step by step solution

01

Step.1 Introduction 

Unemployment can be defined as the situation when a person who is able to work and is work, is also actively looking for jobs but is not able to find one. The type of unemployment caused by the cyclical fluctuations is known as cyclical unemployment.

02

Step.2 Explanation 

Cyclical unemployment will fall when an economy is doing goods and is in the phase of expansion. Because in the time of expansion the firms will hire a greater number of people. An increase in labor demand would cause rightward shift in the demand curve, increasing employement.

Cyclical unemployment will rise when the economy is not doing good and is in a state of recession. Because at the time of recession the firms will hesitate from hiring people. An decrease in labor demand would cause leftward shift in the demand curve, reducing employement.

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Most popular questions from this chapter

Beginning in the 1970s and continuing for three decades, women entered the U.S. labor force in a big way. If we assume that wages are sticky in a downward direction, but that around 1970 the demand for labor equaled the supply of labor at the current wage rate, what do you imagine happened to the wage rate, employment, and unemployment as a result of increased labor force participation?

While unemployment is highly negatively

correlated with the level of economic activity, in the real world it responds with a lag. In other words, firms do not immediately lay off workers in response to a sales decline. They wait a while before responding. Similarly, firms do not immediately hire workers when sales pick

up. What do you think accounts for the lag in response time?

Under what condition would an increase in the unemployment rate be a positive sign?

A country with a population of eight million adults

has five million employed, 500,000 unemployed, and the rest of the adult population is out of the labor force. What鈥檚 the unemployment rate? What share of population is in the labor force? Sketch a pie chart that divides the adult population into these three groups.

Name and explain some of the reasons why wages are likely to be sticky, especially in downward adjustments.
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