If employment insurance benefits were so generous that they paid laid-off worker

Question

If employment insurance benefits were so generous that they paid laid-off workers 90% of their regular pay, A.  reported unemployment would likely overstate true unemployment B.  reported unemployment would likely understate true unemployment C.  frictional unemployment would fall If employment insurance benefits were so generous that they paid laid-off workers 90% of their regular pay, A.  reported unemployment would likely overstate true unemployment B.  reported unemployment would likely understate true unemployment C.  frictional unemployment would fall

Explanation / Answer

If employment insurance benefits were so generous that they paid laid - off workers 90% of their regular pay,there is a very good chance that those who are getting paid for doing no work are pooled into the work force instead of using the otherwise more obvious term "earning force" for them.
Hence the reported unemployment which is the complement of the reported employment in the "working age population" would likely understate the true unemployment. And such an understatement is not good for the economy as all the policies are made taking into account the 'reported' unemployment which in this case inflates the real work force.

It is like getting into a fight with beer muscles taking them for strength.
Very rarely does one not get punched in the face in such an encounter because the perspective is not backed by reality.

Hence option B. is the answer.

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