Explain how the existence of unemployment compensation may actually result in a higher unemployment rate than would otherwise occur if there where no such compensation in the first place
What will be an ideal response?
The existence of unemployment compensation reduces the opportunity cost of looking for work. Job searchers may take longer looking for work under such a system. However, without any unemployment compensation job seekers may choose to accept job offers more quickly in order to "pay the bills" since they are not receiving compensation while they are searching for work. In a nutshell the opportunity cost of searching is very high and they may prefer to end their job search much more quickly.
You might also like to view...
How do decreasing returns to scale affect the shape of the long-run average cost curve?
What will be an ideal response?
If President Obama agrees with his economic advisers who advocate cutting the rate of unemployment to 3 percent and the rate of inflation to 2 percent, you know he
a. believes the Phillips curve represents his only options b. believes in the rational expectations theory c. is a Keynesian d. is a neo-Keynesian e. believes the Laffer curve has validity
Which of the following is not an advantage of fixed nominal exchange rates?
a. They secure the international competitive position of a nation. b. They can reduce short-term business risks associated with international payments for trade. c. International price comparability is promoted. d. Nations can reduce or eliminate the cost of hedging.
If the price elasticity of supply of tablets is constant and equal to 2.5, a 10 percent increase in price will result in a change in quantity supplied equal to
A) 2.5 percent. B) 25 percent. C) 20 percent. D) -20 percent.