Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Higher aggregate demand leads to lower unemployment
B
Higher aggregate demand leads to higher unemployment
C
There is no relationship between aggregate demand and unemployment
D
Lower aggregate demand leads to lower unemployment
Understanding the Answer
Let's break down why this is correct
Answer
Aggregate demand is the total amount of goods and services that people in an economy want to buy at different price levels. When aggregate demand is high, businesses need to produce more to meet this demand, which usually means they will hire more workers. This increase in hiring can lead to lower unemployment because more people are finding jobs. On the other hand, if aggregate demand falls, businesses may cut back on production and lay off employees, causing unemployment to rise. For example, during a holiday season, if many people buy gifts, stores may hire extra staff, reducing unemployment in that area.
Detailed Explanation
When people want to buy more goods and services, businesses need to hire more workers. Other options are incorrect because This idea suggests that when people buy more, it somehow causes more job losses; This option says there is no link between buying and jobs.
Key Concepts
Aggregate demand
Topic
Aggregate Demand and Unemployment
Difficulty
easy level question
Cognitive Level
understand
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