Question

micro-macro economics theories.

Briefly elaborate on why the unemployment rate is seen as an important indicator for the health of an economy. (1)

Answer 1

Consider the fact that the unemployment rate is increasing and this indicates that the companies are trying to cut down their costs by reducing the number of people in their staff on the whole. As this scenario increases the number of people who are unemployed actually gets to increase and this means that there is a high chance that the company is undergoing a recession phase. This means that the economy is moving in a depression mode or downwards in the business cycle and the GDP levels get to reduce where reduction in unemployment rate it is an indicator for expansion of the country e where people get to set up new businesses and take the unemployed people into work and in this way unemployment rate can get to indicate what is the status of the economy right now whether it is expanding or sliding downwards.