1. Discuss what happens in a recessionary phase of the business cycle with respect to borrowing, liquidity and psychological outlook.

2. For each, state whether the unemployment is structural, frictional or cyclical.

a. Unemployment rises as output in the economy falls.

b. As it becomes more acceptable for mothers to work, more women enter the labor market looking for work. The unemployment rate rises.

c. As the United States becomes a more high-tech producer, labor-intensive factories relocate to low-wage countries. Factory workers lose their jobs and the unemployment rate rises.

d. The demand for workers in the southwest increases as more people search for work in the northeast.

e. Foreign economies slow and demand fewer U.S. exports. Unemployment rate rises.