When the gross domestic product (GDP) is shrinking, what is most likely happening to the unemployment rate?

Answer 1

When the gross domestic product (GDP) is shrinking, it is most likely that the unemployment rate is increasing. A shrinking GDP is usually indicative of an economic downturn or recession, which often leads to reduced business activities, decreased production, and lower demand for goods and services. As a result, companies may lay off workers or reduce hiring, leading to an increase in unemployment. The reverse is also true; during a period of economic expansion and increasing GDP, the unemployment rate tends to decrease as businesses expand and create more job opportunities.