Question

Fill in the blanks to make the following statements correct a. The NAIRU is composed of frictional unemplöyment and unemployment. The NAIRU is always than zero b. If there are 1000 loggers in British Columbia who are unemployed, and 1000 vacant positions for call centre operators in New Brunswick, we say that this unemployment is percentage points are due to C. Suppose the NAIRU in June 2018 was 60 percent. If the actual unemployment rate was 82 percent, we can conclude that factors and the remaining percentage points are due to and factors d. Suppose the government increased the number of weeks that an unemployed worker can collect El benefits from 12 weeks to 16 weeks. The NAIRU is likely to because of an increase in the amount of unemployment e. Countries with greater labour market flexibility are likely to have unemployment rates than countries in which policies inhibit flexibility 1. Cyclical unemployment can be reduced by closing gaps by using policies Enter your answer in each of the answer boxes

Answer 1

(a)

NAIRU is composed of frictional and structural unemployment. NAIRU is always greater than zero.

(b)

This unemployment rate is structural unemployment (since this is caused by a skill mismatch).

(c)

2.2 (= 8.2 - 6) percentage points are due to Cyclical factors and remaining 6 percentage points are due to frictional and structural factors.

(d)

NAIRU is likely to increase due to increase in frictional unemployment.

(e)

Countries with greater labor market flexibility likely to have lower unemployment rates.

(f)

Cyclical unemployment can be reduced by closing Recessionary (negative output) gap by using expansionary fiscal/monetary policies.