In the DMP model,a decrease in productivity
A) decreases the unemployment rate.
B) reduces the vacancy rate.
C) increases the unemployment rate.
D) increases the size of the labor force.

Question

Quizplus · Accepted Answer

According to the DMP model, a decrease in productivity reduces the demand for labor, leading to a decrease in job creation and an increase in the unemployment rate. This is because firms are less willing to hire workers when they are producing less output per worker, resulting in a higher number of unemployed workers in the economy. Therefore, the correct answer is (C) increases the unemployment rate.

In the DMP Model,a Decrease in Productivity