Sunday, August 9, 2009

When GDP rises it seems that the unemployment rate falls...why is that?

A rise in GDP is simply a measure of the real increase in production of goods and services. There are two basic components to increasing production: 1) having more workers to produce things 2) having better productivity among the existing workforce.



It%26#039;s possible that productivity growth alone will enable a certain amount of rise in GDP without hiring more workers, but as a general rule more jobs are in fact created when GDP is growing. Down at the level of any business, to increase production when demand calls for it, you might buy new equipment or pay existing workers overtime to increase your productivity -- but often it is just cheaper and easier, or otherwise necessary, to hire more humans.



When GDP rises it seems that the unemployment rate falls...why is that?unemployment rate





When the GDP rises so does the need for workers. The more goods and services the public requires the more people it takes to see that these needs are met.

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