In equilibrium, an decrease in matching efficiency
A) increases the unemployment rate and vacancies are constant.
B) increases the unemployment rate and vacancies increase.
C) decreases the unemployment rate and vacancies are constant.
D) decreases the unemployment rate and vacancies increase.
E) increases the unemployment rate and vacancies decrease.

Question

Quizplus · Accepted Answer

A decrease in matching efficiency means that it is harder for job seekers and employers to find each other, leading to a decrease in the number of matches. This results in an increase in the unemployment rate because job seekers are unable to find employment opportunities. However, vacancies remain constant because there are still job openings available, but they are not being filled due to the decrease in matching efficiency.

In Equilibrium, an Decrease in Matching Efficiency