A politician makes the following argument: \"The economy would operate more effi
ID: 1142997 • Letter: A
Question
A politician makes the following argument: "The economy would operate more efficiently if frictional unemployment were eliminated. Therefore, a goal of government policy should be to reduce the frictional rate of unemployment to the lowest possible level." Eliminating all frictional unemployment A. will be good for the economy because the total unemployment will fall. B. will not be good for the economy since the presence of frictional unemployment increases economic efficiency. C. will not be good for the economy since the presence of frictional unemployment decreases job creation. D. will be good for the economy since the presence of frictional unemployment increases job destruction.
Explanation / Answer
Answer - B) - will not be good for the economy since the presence of frictional unemployment increases economic efficiency.
Explanation -
Frictional Unemployment - the unemployment which exists in any economy because of time spent by people between jobs when a worker is searching for or making transition from one job to another.
Also, frictional unemployement benefit the economy. How?
- Company have good opportunities to find qualified workers because if everyone didn't leave the job before the found new ones, then company would face problems in hiring new workers.
- Also, if frictional unemployment is reduced to minimum, then labor costs would rise and thus it will push up the cost in the economy, creating a tendency for inflation.
- There are many personal and family reasons as well like retirement, pregrancy, health problems, education issues etc.
- It gives many young graduduates to seek better opportunities.