Question

This graph shows changes in GDP and the unemployment rate in the United States in recent years.

Which statement most accurately describes the trends shown on this graph?

A) When GDP falls, unemployment rises.
B) GDP and unemployment have little to do with each other.
C) When GDP rises, unemployment rises as well.
D) GDP and unemployment rise at times of world crises.

Answer 1

A) When GDP falls, unemployment rises.

Step-by-step explanation:

GDP and unemployment are closely related, when GDP is high unemployment is low, and when unemployment rises, GDP shoul be low.

Gross domestic product, can not only be affected by unemployment, there a lot of other factors, but historically when a rise of 2 or more points of unemployment occurs, GDP drops half of those points.

Answer 2

The correct answer is A.

The Gross Domestic Product (GDP) is the measure which agreggates the monetary value of all goods and services produced in an economy during a certain period of time, generally one year. This macroeconomic figure is constituted by the following elements:

GDP = C + I + G + XN

where,

C = household's consumption

I = private investment

G = public expenditure

XN = net exports = exports (X) - imports (M)

When production increases so do the employment levels, as more factors of production are demanded to be transformed into the products and services that constitute the GDP increase. Therefore, unemployment levels decrease.