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Chapter 8: Q.20 (page 214)

Why is there unemployment in a labor market with flexible wages?

Short Answer

Expert verified

Because of frictional and structural unemployment.

Step by step solution

01

Step.1 Introduction

Unemployment can be defined as the situation when a person who is able to work and is work, is also actively looking for jobs but is not able to find one. The percentage of working population that cannot find work is known as unemployment rate.

02

Step.2 Explanation

When wages are flexible yet there is some unemployment remains in the economy because of the existence of frictional and structural unemployment. Frictional and structural unemployment are inevitable and unavoidable forces.

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Most popular questions from this chapter

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?

Name and explain some of the reasons why wages are likely to be sticky, especially in downward adjustments.

Unemployment rates have been higher in many

European countries in recent decades than in the United States. Is the main reason for this long-term difference in unemployment rates more likely to be cyclical unemployment or the natural rate of unemployment? Explain briefly.

What criteria do the BLS use to count someone as employed? As unemployed?

As the baby boom generation retires, the ratio of retirees to workers will increase noticeably. How will this affect the Social Security program? How will this affect the standard of living of the average American?
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