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Changes of unemployment during a business cycle

Business cycles are frequent variations in the country's economic output (Eusepi, 2011). Each cycle consists of four stages: development, peak, contraction and trough.
Business cycles are marked by alternate stages of economic growth and economic contraction.
How unemployment varies over the market cycle and why these changes are occurring
During global expansion, the nation is seeing economic growth and industries are thriving. Businesses are expanding their activities resulting in the development of new job opportunities. In the other hand, the global crisis slows down the country's economic operations. This is reflected by indicators such as high inflation rates and a decline in company profits (R. Glenn, 2010). To cope with these slow down, businesses opt to retrench and halt hiring new staff with an aim of cutting down the operation costs leading to increased unemployment in the economy.

These changes in business cycles are caused by various factors. These factors include; increase in interest rate, fiscal policy, monetary policy and changes in the exchange rate. Fiscal and monetary policy are put in place to regulate money supply and government spending in the economy.

Conclusion

All in all, business cycle are inevitable in any economy. It is upon the economists and policy makers to come up with measures that minimize the effects of business cycle fluctuations. This will help a country prevent the occurrence of an economic crash as was experienced during the 2007/2008 financial crisis that led massive loss of jobs.

References

Eusepi, S., & Preston, B. (2011). Expectations, learning, and business cycle fluctuations. The American Economic Review, 101(6), 2844-2872.

R. Glenn Hubbard and Anthony Patrick O’ Brien Pearson. (2015). Essentials of Economics 4th Edition.

July 24, 2021

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