Question

3. What is the relationship between frictional unemployment and the natural rate of unemployment? Why does frictional unemployment differ among different age groups in the population? If a society is aging overall, how will this affect unemployment? Be as thorough as possible.

2. Explain the benefits and drawbacks for unemployment insurance. Explain the benefits and drawbacks to the minimum wage. How do these policies affect work incentives? Be as thorough as possible.

1. In 2012, the imaginary nation of Bovina had a population of 8,044 and real GDP of 36,198,000. In 2013 it had a population of 7,800 and real GDP of 35,880,000. What is the growth rate of real GDP per person (i.e. percentage change) in Bovina between 2013 and 2012?
   1. -2.2 percent
   2. -0.7 percent
   3. 2.2 percent
   4. 4.5 percent

Answer 1

Answer to the first question has been provided :

1) Natural rate of unemployment is normal rate of unemployment that is sum total of frictional and structural unemployment . It is the long run average or steady state unemployment . It depends on the rates of job separation and job finding .

Frictional unemployment is the job search unemployment . Occurs due to the time taken to match workers with jobs . So frictional unemployment is a part of natural rate of unemployment .

Frictional unemployment depends upon job matching and search rate . Younger people and skilled people so not spend longer time in job search since their demand is higher in job market . So it various among age groups .

If a society is aging overall then unemployment will be depend on dependency ratio . Aged people maybe a part of work force but if they are no longer a part of work force then dependency ratio increases . Unemployment basically depends on supply and demand for jobs , not on age of the work force .