The relationship described by the graph is as follows:
- Business Cycle - The economy operates in a cycle where there is expansion and recession. In a recession, less goods are produced because there is less demand. An expansion is the direct opposite.
- Unemployment rate- During a recession, the unemployment rate increases because businesses try to make less losses by terminating people as a result of the fall in demand. This situation changes in the opposite direction during an expansion.
- Recession - In a recession, people and businesses demand less goods and services on account of a fall in income. This leads to companies reducing production so as not to make losses from not being able to sell all that they produced.
- GDP - During a recession, the GDP reduces because the production in a country reduces. During an expansion, GDP increases on account of the availability of more goods and services.
In conclusion, the GDP, unemployment, recession and the business cycle are related.
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