QuestionSeptember 20, 2025

Which of the following would be most likely to cause a decrease in the natural rate of unemployment? Choose 1 answer: A A recession causes widespread layoffs B More people opt for an early retirement C An economic boom leads a temporary increase in output D People enter the job market at an earlier age E Public policies such as unemployment insurance are introduced

Which of the following would be most likely to cause a decrease in the natural rate of unemployment? Choose 1 answer: A A recession causes widespread layoffs B More people opt for an early retirement C An economic boom leads a temporary increase in output D People enter the job market at an earlier age E Public policies such as unemployment insurance are introduced
Which of the following would be most likely to cause a decrease in the
natural rate of unemployment?
Choose 1 answer:
A A recession causes widespread layoffs
B More people opt for an early retirement
C An economic boom leads a temporary increase in output
D People enter the job market at an earlier age
E Public policies such as unemployment insurance are introduced

Solution
4.5(164 votes)

Answer

D People enter the job market at an earlier age Explanation 1. Identify the natural rate of unemployment The natural rate is determined by frictional and structural factors, not cyclical changes. 2. Analyze each option for impact on natural rate A (recession) affects cyclical, not natural rate. B (early retirement) reduces labor force, not unemployment rate. C (boom) is temporary/cyclical. D (earlier entry) increases labor supply, potentially reducing frictional unemployment. E (unemployment insurance) may increase natural rate by reducing job search incentives.

Explanation

1. Identify the natural rate of unemployment<br /> The natural rate is determined by frictional and structural factors, not cyclical changes.<br />2. Analyze each option for impact on natural rate<br /> A (recession) affects cyclical, not natural rate. B (early retirement) reduces labor force, not unemployment rate. C (boom) is temporary/cyclical. D (earlier entry) increases labor supply, potentially reducing frictional unemployment. E (unemployment insurance) may increase natural rate by reducing job search incentives.
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