Would you expect the natural rate of unemployment to remain the same within one country over the long run of several decades?

Short Answer

Expert verified

Generally, it will remain the same but have some exceptions.

Step by step solution

01

Step 1. Definition

In an economy the workers may come and go and always look for a better job, the period of joblessness in which the workers are looking for a job is called the natural level of unemployment.

02

Step 2. Explanation

Normally the rate of natural unemployment remains the same over time but may change in some drastic situations like any reforms in public policy etc.

03

Step 3. Example

Take an example like in a country where guaranteed unemployment insurance, welfare benefits, food, medical benefits are given to an unemployed person here the person is less likely to work because the opportunity cost of being unemployed is less. So, in this country, the natural rate of unemployment is more as compared to the country which doesn’t provide these benefits to the unemployed.

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Most popular questions from this chapter

A government passes a family-friendly law that no companies can have evening, nighttime, or weekend hours so that everyone can be home with their families during these times. Analyze the effect of this law using a demand and supply diagram for the labor market: first assuming that wages are flexible, and then assuming that wages are sticky downward.

How do you calculate the unemployment rate? How do you calculate the labor force participation rate?

Do you think it is rational for workers to prefer sticky wages to wage cuts when the consequence of sticky wages is unemployment for some workers? Why or why not? How do the reasons for sticky wages explained in this section apply to your argument?

What type of unemployment (cyclical, frictional, or structural) applies to each of the following:

(a) landscapers laid off in response to a drop in new housing construction during a recession.

(b) coal miners laid off due to EPA regulations that shut down coal-fired power

(c) a financial analyst who quits his/her job in Chicago and is pursuing similar work in Arizona

(d) printers were laid off due to a drop in demand for printed catalogs and flyers as firms go the internet to promote and advertise their products.

(e) factory workers in the U.S. were laid off as the plants shut down and move to Mexico and Ireland.

The U.S. unemployment rate increased from 4.6%

in July 2001 to 5.9% by June 2002. Without studying the subject in any detail, would you expect that a change of this kind is more likely to be due to cyclical unemployment or a change in the natural rate of unemployment? Why?

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