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Chapter 21: Q 24. (page 524)

Would you expect the natural rate of unemployment to be roughly the same in different countries?

Short Answer

Expert verified

No, we can't expect the natural rate of unemployment to be roughly the same in different countries.

Step by step solution

01

Step 1. Definition

In an economy the workers may come and go and always look for a better job, the period of joblessness in which the workers are looking for a job is called the natural level of unemployment.

02

Step 2. Explanation

Different countries have different rates of natural unemployment because of the public policies they follow and other reasons.

Take an example like in a country where guaranteed unemployment insurance, welfare benefits, food, medical benefits are given to an unemployed person here the person is less likely to work because the opportunity cost of being unemployed is less. So, in this country, the natural rate of unemployment is more as compared to the country which doesn鈥檛 provide these benefits to the unemployed.

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Most popular questions from this chapter

Would you expect hidden unemployment to be higher, lower, or about the same when the unemployment rate is high, say 10%, versus low, say 4%? Explain.

While unemployment is highly negatively correlated with the level of economic activity, in the real world it responds with a lag. In other words, firms do not immediately lay off workers in response to a sales decline. They wait a while before responding. Similarly, firms do not immediately hire workers when sales pick up. What do you think accounts for the lag in response time?

Over the long term, has the U.S. unemployment rate generally trended up, trended down, or remained at basically the same level?

What criteria do the BLS use to count someone as

employed? As unemployed?

If many workers become discouraged from looking for jobs, explain how the number of jobs could decline but the unemployment rate could fall at the same time.
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