Question of the Week

Unemployment resulting from changes in the basic composition of the economy, which at the same time opens new positions for trained workers is known as:

a) Structural Unemployment
b) Cyclical Unemployment
c) Frictional Unemployment
d) Natural Unemployment
e) None of these are correct


Answer:

The correct answer is a.

An example of structural unemployment is the technological revolution. Computers might have eliminated jobs, but it also opened up new positions for those who had the skills to operate the computers.

Frictional unemployment occurs when workers and employers have inconsistent or incomplete information. For example a person might be able to get a job, but is holding out for a better paying one.

Cyclical unemployment results from changes in the business cycle.

Natural unemployment is similar to the long run average unemployment. It is important to remember that 'full employment' is when the economy is at its natural rate of unemployment.

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