Question

Suppose the National Bureau of Economic Research (NBER) comes out with a report suggesting that the economy will soon dip into recession. You can expect that: (A) The labor force participation (B) The frictional unemployment (C) The structural unemployment (D) The cyclical unemployment

Answer 1

Answer:

(D) The cyclical unemployment

Explanation:

Business activity is subject to the comings and goings of private initiative, so the expansion and recession phases of the economy affect the number of unemployed.

Cyclical unemployment increases considerably during times of recession, due to the deterioration of economic conditions; while decreasing in the stages of expansion, due to the improvement of the economy.

Governments try to reduce the incidence of this type of unemployment by softening the transition between different economic cycles. The objective is that the labor supply does not vary significantly between the stages of expansion and recession so that its demand is not excessively impaired.