Question

During business cycles, the economy features loops around the curve. In which direction do these loops occur in terms of the clockwise and counter-clockwise?

a) Clockwise; Beveridge
b) Clockwise; Vacancy supply
c) Counter-clockwise; Beveridge
d) Counter-clockwise; Vacancy supply

Answer 1

The correct direction of loops during business cycles, as represented by the Beveridge Curve, is clockwise. This is due to the cyclical changes in hiring and unemployment that occur during economic expansions and recessions. The correct answer is a).

Step-by-step explanation:

The direction of the loops that occur in a business cycle in terms of clockwise and counter-clockwise movements can be understood through the Beveridge Curve, which illustrates the relationship between unemployment and the job vacancy rate. The correct answer is a) Clockwise; Beveridge. During an economic expansion, firms increase hiring which reduces unemployment and increases the vacancy rate, moving the curve downwards and to the right. Conversely, in a recession, hiring decreases which increases unemployment and reduces the vacancy rate, moving the curve upwards and to the left. This cyclical pattern creates a clockwise loop around the trend of long-term growth.