Question

Which of the following is not correct? a. Frictional unemployment is inevitable in a dynamic economy. b. Although the unemployment created by sectoral shifts is unfortunate, in the long run such changes lead to higher productivity and higher living standards. c. The internet can help facilitate the job search and reduce frictional unemployment. d. Unemployment insurance decreases frictional unemployment.

Answer 1

Answer: Unemployment insurance decreases frictional unemployment.

Explanation:

FRICTIONAL UNEMPLOYMENT

This is unemployment caused by people moving from one job to another. It is temporary and is part of the natural rate of unemployment.

Unemployment insurance does not reduce unemployment because to get unemployment insurance you have to be just that, unemployed. An unemployed person getting unemployment insurance is still unemployed.

Perhaps more concerning is that unemployment insurance might actually increase frictional unemployment. With people getting Unemployment Insurance they might take longer finding a job that they 'feel' suits them, in other words they become selective because they have a financial cushion to fall back on.

Answer 2

Answer:

d. Unemployment insurance decreases frictional unemployment.  

Explanation:

Unemployment insurance tends to reduce search effort of unemployed individuals which could bring about an increase in the level of unemployment in a country.