Question

How will the following changes affect the natural rate of unemployment?

The government reduces the time during which an unemployed worker can receive benefits.

Solution

Verified
Answered 2 years ago
Answered 2 years ago
Step 1
1 of 3

Let`s first determine how natural unemployment should be calculated so that we be aware of the factors affecting it

Natural unemployment = Frictional unemployment + Structural unemployment

Now let`s see how each of the factors can affect natural unemployment:

a). Government actions

As known, generous unemployment benefits usually increase both structural and frictional unemployment because people will get money without having to work

Therefore, if the government, contrary, reduces the time during which an unemployed worker can receive benefits, this will decrease natural unemployment\textit{decrease natural unemployment} since more people will try to find a job now that no more benefits are given to them

b) Teenagers focus on studies

As we know, frictional unemployment exists when the number of people seeking jobs is equal to the number of jobs being offered and since the teenagers in this particular case are not looking for the jobs, this means that frictional unemployment will decrease and that therefore the natural rate of unemployment will decrease

c) Use of internet

Again, more people will have access to jobs supply, therefore, frictional unemployment will decrease and as a result, natural unemployment will also decrease

Create an account to view solutions

Create an account to view solutions

More related questions

1/4

1/7