Discuss briefly how each of the following changes would affect the natural rate

Question

Discuss briefly how each of the following changes would affect the natural rate of unemployment.
a. The economy enters a period of little structural change and all industries are growing at about the same rate.
b. Schools operate for the full year, so there are no students looking for summer work.
c. The Internet lists all the jobs available in the whole country, so it is easier for job seekers to locate potential job.
d. People who quit their jobs are drafted into low-wage community service jobs.
e. In addition to unemployment insurance, the unemployed receive a bonus for finding new jobs; the bonus is greater if the job is found in the first few weeks of search and declines with the duration of search.

Explanation / Answer

Discuss briefly how each of the following changes would affect the natural rate of unemployment.

a. The economy enters a period of little structural change and all industries are growing at about the same rate.

Since there is little structural change in the economy, the structural unemployment is lower. Also, with all industries growing at the same rate, the total employment opportunities in the economy has grown and hence the natural rate of unemployment is lower.

b. Schools operate for the full year, so there are no students looking for summer work.

Assuming that when schools were not operating for the full year, the students were part of the labor force, i.e. actively looking for employment during the period when schools weren

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.