Question

Yvonne is telling her friend Wendy that wages are rising and so is the unemployment rate. She tells Wendy that she (Yvonne) may be the next person to be fired at her company and that she may have to move back in with her parents. What does the economy have to do with Yvonne's possibly having to move back in with her parents?

Short answer

The economy affects Yvonne’s situation because if her employer cannot afford the rising wages, she might lose her job and become part of the increasing unemployment statistics. Losing her main source of income might force her to reduce her living costs which could include moving back in with her parents.

Step-by-step solution

Understand the Economic Terms

Start by understanding the economic terms in the question. Wages are the amount paid for work or a job while the unemployment rate is a economic indicator that shows the percentage of the labor force that is jobless.

Link Between Wages and Unemployment Rate

Recognize that in some economic scenarios, rising wages can lead to higher unemployment rates. This can happen for several reasons. One common example is when businesses cannot afford the higher wages, they may need to lay off workers, thus increasing the unemployment rate.

Relate the Economic Conditions to Individual's Situation

The economic conditions can affect Yvonne's personal circumstances. Because her employer might not be able to afford to pay increasing wages, she might lose her job (thus joining the unemployed), and in order to reduce her living cost, she might have to move back in with her parents.