Typically during an expansion in the economy A

Business Dec 23, 2020

Typically during an expansion in the economy

A. incomes and unemployment rise.

B. incomes fall and unemployment rises.

C. incomes fall and unemployment falls.

D. incomes increase and unemployment falls.

Expert Solution

The answer is D. incomes increase and unemployment falls.

In an expansion, output rises and so does the aggregate demand. Hence, equilibrium output increases. Since total income must be equal to total output, income must rise as well. Increased output implies higher employment of workers, and thus, lower unemployment rate.

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