Question

Consider an economy at full employment. if consumers and firms become less optimistic about the future economy then:____.

Answer 1

If consumers and firms become less optimistic about the future economy then (C) unemployment will rise.

What is unemployment?

• Unemployment is the state of being capable of working, actively seeking work, but unable to find any.
• It should be noted that in order to be considered unemployed, a person must be an active member of the labor force and actively seeking remunerative work.
• Unemployment reduces demand, consumption, and purchasing power, resulting in lower profits for businesses and budget cuts, and workforce reductions.
• It starts a vicious cycle that is difficult to break without outside intervention.
• Unemployment will rise if consumers and businesses become less optimistic about the future economy.

Therefore, if consumers and firms become less optimistic about the future economy then (C) unemployment will rise.

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The complete question is shown below:
1. Consider an economy at full employment. If consumers and firms become less optimistic about the future economy then

a) price levels will rise.

b) output will rise.

c) unemployment will rise.