Compare two countries, one that has unlimited unemployment insurance and one in
which workers are only eligible for 26 weeks of unemployment insurance. One reason
why the country with more unemployment insurance may have a higher equilibrium
unemployment rate is that - workers in the country with unlimited unemployment
benefits have less incentive to search diligently for work
As a recession drags on for an extended period of time, what happens to the labor force
participation rate and why? - the labor force participation rate will fall. Workers who have
been cyclically unemployed for a long period of time begin to see their skills deteriorate
and may move from cyclically unemployed to structurally unemployed.
frictional unemployment - the unemployment which exists in any economy due to people
being in the process of moving from one job to another.
structural unemployment - unemployment resulting from industrial reorganization,
typically due to technological change, rather than fluctuations in supply or demand.
cyclical unemployment - a factor of overall unemployment that relates to the cyclical
trends in growth and production that occur within the business cycle. When business
cycles are at their peak, cyclical unemployment will be low because total economic
output is being maximized.
It may be rational for a firm to offer wages above the minimum wage because paying
higher wages: - is likely to attract higher-quality workers, who will be more productive,
and there will likely be less turnover
The traditional goal of a government is to maximize its citizens' welfare.
Given this goal, eliminating unemployment insurance would: - remove a safety net that
protects people from economic variations that are beyond their control and therefore
would reduce citizens' welfare on average.
If the goal of the government is to maximize employment, eliminating unemployment
insurance would: - encourage workers to find another job as soon as they lose a job,
making the goal of employment maximization easier to achieve.
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