Answer to Question #134702 in Macroeconomics for Karla Lubbe

Question

An upswing phase of the business cycle is associated with an increase in unemployment. Is this statement true?

Answer 1

$ANSWER$

The statement is False

$EXPLANATION$

The upswing phase of a business cycle is a phase characterised by a rapid growth in gross domestic product (GDP). Investment levels are on the increase, and actual GDP approaches potential GDP at peak. As a result, along the upswing phase, the deflationary/recessionary gap will be reducing significantly hence reducing unemployment. Resource utilizing will be improving, and idle resources, including labour, decreasing hence reducing unemployment levels.

Therefore, the upswing phase of the business cycle is characterised with falling unemployment and rising employment.