Why Does Unemployment Tend to Change When the Level of Output

question 65

Multiple Choice

Why does unemployment tend to change when the level of output changes?

• A)Persons wish to buy things, and if output falls, people need to work less to earn the income to buy the smaller output.
• B)Labor is an input, and if output falls, employers need fewer workers to make it, so the employment falls.
• C)When output rises, persons are more interested in buying, and will work more to earn the income to buy things.
• D)Persons face the option of buying or working, so that when they do more of one, the other necessarily falls.
• E)When companies replace workers with machines, output rises, and people take time off from work to buy before returning to employment.

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Definitions:

NPV

Net Present Value is the difference between the current value of cash inflows and the current value of cash outflows over a period of time, used in capital budgeting to assess the profitability of an investment.

Simulation Analysis

A combination of scenario and sensitivity analyses.

Capital Budgeting

The process by which investors and managers decide which long-term projects or investments a business should undertake, based on potential profitability.

What-If Questions

Scenario-based queries used to assess the impact of potential changes or decisions in a given situation.