Practice question · Put in order
Order the chain by which a recession creates cyclical unemployment.
- Consumer demand for products collapses
- Firms’ revenues fall across the economy
- Unemployment rises until demand recovers
- Layoffs spread through many industries at once
- Derived demand for labor shifts left
Hints
- Labor demand is derived, start with the product market.
- The cure arrives in the same order, reversed.
Show the answer
- Consumer demand for products collapses
- Firms’ revenues fall across the economy
- Derived demand for labor shifts left
- Layoffs spread through many industries at once
- Unemployment rises until demand recovers
Why
Cyclical unemployment travels from product demand to labor demand, which is why it lifts economy-wide with recovery, unlike its structural cousin.
Practise Labor Economics
The app has 9 more questions on this lesson, and keeps your place in the course. Business I is free to start.