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The costs of the business cycle do not always average out over the cycle for all of the following reasons except A
The costs of the business cycle do not always average out over the cycle for all of the following reasons except
A. The negative effects of recessions on workers' incomes can last many years.
B. The unemployment and lost income resulting from a recession is concentrated among low-income workers.
C. Recessions do not necessarily have the same magnitude as expansions.
D. Labor experiences unemployment but capital does not.
E. Extended spells of unemployment can debilitate worker skills, producing a rise in structural unemployment.
Expert Solution
- The correct option is D. Labor experiences unemployment but capital does not.
Usually, the cost of the business cycle does not average out as there is a rise in the inequalities towards lower-income workers, a rise in structural unemployment, and a rise in the long-run negative effects concerning the irregularity in the cycle. However, due to as a general fact the labor experiences unemployment level in the economy whereas capital doesn't.
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