While unemployment is highly negatively correlated with the level of economic activity, in the real world it
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While unemployment is highly negatively correlated with the level of economic activity, in the real world it responds with a lag. In other words, firms do not immediately lay off workers in response to a sales decline. They wait a while before responding. Similarly, firms do not immediately hire workers when sales pick up. What do you think accounts for the lag in response time?
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There are a number of factors that account for the lag in response time between changes in economic activity and changes in unemployment Hiring and fi...View the full answer
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Rayan Gilbert
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