Question

Recovery​ won't improve unemployment Despite some optimism about the seeds of​ recovery, the Congressional Budget Office​ (CBO) sees joblessness rising. The CBO sees unemployment peaking at​ 10.4% next year from an average of​ 9.3% this​ year, before it falls to​ 9.1% in 2011. ​Source: Fortune​, August​ 25, 2009 Why does unemployment continue to rise as an expansion​ begins? A. The unemployment rate is a leading indicator of the business​ cycle, so unemployment continues to rise as an expansion begins. B. In the early stages of an​ expansion, the labor force decreases. C. In the early stages of an​ expansion, unemployment increases as firms lay off workers in an attempt to cut costs. D. As an expansion​ begins, previously marginally attached workers look for​ jobs, exceeding the number of people hired.

Answer 1

Unemployment rate is not a good indicator of business cycle because it is at its peak when the recession ends. However, it is true that when there is an expansion going on in the economy, previously marginally attached workers who were not looking for job now start searching for it

This increases the number of job seekers more than the number of vacancies. due to this reason there is an increase in the rate of unemployment even in the recovery phase

Select option D