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Chapter 21: Q. 38 (page 525)

Under what condition would a decrease in

unemployment be bad for the economy?

Short Answer

Expert verified

A decrease in unemployment would be bad for the economy when there is an increase in the number of discouraged workers.

Step by step solution

01

Step 1. Unemployment Rate.

The unemployment rate is the percentage of adults who are in the labor force and thus seeking jobs, but who do not have jobs.

02

Step 2. Decrease in Unemployment.

A decrease in unemployment would be bad for the economy when there is an increase in the number of discouraged workers which will lead to a decrease in the labor force. The unemployment rate will fall despite bad economic conditions.

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Most popular questions from this chapter

Is it desirable to pursue a goal of zero unemployment? Why or why not?

What is frictional unemployment? Give examples of frictional unemployment.

After several years of economic growth, would you expect the unemployment in an economy to be mainly cyclical or mainly due to the natural rate of unemployment? Why?

Using the above data, what is the unemployment rate? These data are U.S. statistics from 2010. How does it compare to the February 2015 unemployment rate computed earlier?

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