please help Peter and Paul, who work in the same company, are having a serious d
ID: 1107656 • Letter: P
Question
please help
Peter and Paul, who work in the same company, are having a serious debate regarding the state of the economy, during their lunch break. Although both of them are doing fine, Paul thinks that rising wages may be a precursor to rising unemployment. Last quarter, there was a slight increase in the unemployment rate. He tells Peter that their company may start firing people soon and that they may have to move back in with her parents. What does the economy have to do with them possibly having to move back in with her parents?
Explanation / Answer
Given that the last quarter has experienced a slight increase in the unemployment rate, Paul believes that his company is also going to lay off many people and then they would not be able to find any job in the market as of now. When Paul believes that he is not going to get any job if he is fired then he must be considering himself structurally unemployed because only structurally unemployed people cannot find job anywhere else in the nation if they are fired. An increase in structural unemployment would increase the natural rate of unemployment for the economy which would have further consequences for the long run potential GDP in the economy.
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