Please answer all parts for upvote. 2.The unemployment system in the United Stat

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Please answer all parts for upvote.

2.The unemployment system in the United States operates through state governments and allows laid of Horizontal (Value) Axis 'permanently' attached to the labor force to collect unemployment benefits. These benefits are related to the previous earnings level (with the replacement rate being about 50% of an unemployed workers previous earnings) and usually last for about 26 weeks Unemployment benefits are financed by taxes paid by employers. The tax rate paid is based on economic conditions, the industry in which the employer is operating, and the employer's layoff experience (experience rating). However, unemployment benefits paid to laid-off employees are not perfectly related to the amount paid in unemployment insurance taxes by an employer. Rather, experience rating is imperfect: the marginal cost of laying off a worker to an employer is typically less than the amount paid to that worker in unemployment benefits Suppose the government were to increase the typical duration of receipt of unemployment benefits from 26 to 39 weeks in an effort to give the unemployed more time to find a job a) How would this change affect the unemployment rate? Identify which, if any, of the three types of unemployment that will change Instead, suppose the unemployment insurance tax code is changed such that employers are required to pay an unemployment insurance tax rate that is exactly equal to the amount of unemployment benefits collected by laid-off employees b) How would this change affect the unemployment rate? Identify which, if any, of the three tvpes of unemployment that will change

Explanation / Answer

a. Increase in the duration of receipt of unemployment benefits will increase th unemployment rate in the economy as unemployed will get more time to look for a good job. Among the three types of unemployment, increase in the duration of receipt of unemployment benefits to give the unemployed more time to find a job will increase the rate if frictional unemployment in the country as people will be wiling to leave their previous jobs to find a new and better job for themselves.

b. Now, the employers have to pay taxes and thus this will increase the cost of unemployment for the employers as they have to pay unemployment benefits and tax based on the unemployment rate in the country. This change will reduce the level of unemployment in the country. Cyclical unempoloyment will decline as employers will lay off less number of workers now.

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