Question

1. "Full employment" exists when the unemployment rate equals?

a. zero

b. the cyclical unemployment rate

c. the structural unemployment rate

d. the natural unemployment rate

e. none of above

2. Which of the following is probably not true regarding unemployment in Europe?

a. unemployment benefits tend to last longer than in the US

b. unemployment benefits tend to replace a larger portion of one's salary than in the US

c. structural unemployment is generally lower than in the US

d. employers are typically less eager to hire new employees than in the US

e. all above are true

Answer 1

Option 'D' is correct.

Full employment exists when unemployment rate equals natural rate of unemployment. It is a situation when Everyone who wants to work they have jobs in hand. It includes natural rate of unemployment which means as people switch jobs there is a stable positive rate of unemployment .

Option 'C' is correct. This is because in USA unemployed workers dropout of the labor force as they get discouraged and stops looking for work whereas in EUROPE, this is not the case , the unemployed remains to be in labor force and hence the unemployment is generally higher in Europe than in US( also the benefits of unemployment is better in Europe than in USA). Since , employment protection is stricter in Europe than in USA , they don't fire them generally so they are less keen to hire new ones.