Suppose the world price of cotton rises. The demand for labor among cotton-produ

Question

Suppose the world price of cotton rises. The demand for labor among cotton-producing firms in Texas wil . The demand for labor among textile-producing firms in South Carolina, for which cotton is an input, will unemployment resulting from such sectoral shifts in the economy is best described as unemployment. Both workers and firms will need some time to adjust to new economic conditions. The Which of the following policies would reduce the natural rate of unemployment in the economy? Check all that apply. An improvement to a widely used job-search website that allows it to match workers to job vacancies more effectively Offering recipients of unemployment insurance a cash bonus if they find a new job within a specifed number of weeks Establishing government-run employment agencies to connect unemployed workers to job vacancies

Explanation / Answer

1) Solution: increase, decrease, frictional

Explanation: Frictional unemployment occurs mainly due to the changes in the demand for labor among firms. When the world price of cotton increases, cotton producing knows it will be more profitable to produce cotton. As cotton producing firms increases production, thus labor demand also increases. For textile producing firms, the increase in the world price of cotton increases the cost of production. As textile producing firms reduces production, the demand for labor in South Carolina decreases.

2) Solution: An improvement to a widely used job-search website that allows it to match workers to job vacancies more effectively

Offering recipients of unemployment insurance a cash bonus if they find a new job within a specified number of weeks

Establishing government-run employment agencies to connect unemployed workers to job vacancies

Explanation: The government-run employment agencies help in connecting unemployed workers to those who require additional labour. The employment bonuses given to unemployed workers who are receiving unemployment insurance benefits would provide workers an incentive to search work more quickly

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