Question

2. (20 points) How will the following changes affect the natural rate of unemployment? Identify the type of unemployment that will be affected and the direction of the change. a. The government reduce the length of time a worker may receive unemployment benefits. Frictional Unemployment would be reduced a lower the natural rate of unemployment b. More teenagers delay looking for jobs until after they complete their college education. Frictional unemployment woulld be reducedd lowered natural Rate of unemployment c. A recession hits and reduces the number of employed workers in all sectors of the economy. d. Factories close and workers cannot find jobs that are similar to the type of jobs they were doing. Structural unemployment e. Frank, a computer analyst, quits his current job to begin another job with better fringe benefits and higher pay. Structural unemployment f. The minimum wage increases from $7.25 per hour to $15.00 per hour. structural unemployment g. Last month, 450,000 additional workers have been unemployed for more than 1 year.

Answer 1

2.

Natural rate of Unemployment gets affected when there is change in frictional, structural or surplus unemployment.

a.

Frictional Unemployment

Reduction in the length of Unemployment benefit will make more people find the job actively leading to decrease in the frictional employment.

This will certainly have impact on natural rate of Unemployment because frictional unemployment is part of it. Hence, natural rate of unemployment will decline.

b.

Will not be considered as unemployed.

Since, the definition of unemployment says that one should actively look for job at going wages to be considered as unemployed so, teenagers who are not looking for jobs will not be considered as unemployment.

It will not at all affect natural rate of unemployment.

c.

cyclical Unemployment.

cyclical unemployment will increase because the business cycle ups and downs comes under cyclical unemployment. Since it is not the part of natural rate of unemployment hence, it will not get affected.

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