Which of the following is a cost of unemployment?
I. output foregone
II. unemployment compensation that must be paid
III. rising inflation that erodes the value of money
A) I, II, and III
B) I and II
C) I and III
D) II and III

Question

Quizplus · Accepted Answer

Output foregone (I) refers to the loss of potential goods and services that could have been produced if unemployed individuals were employed. Unemployment compensation (II) is a direct cost to the government or employer, as they have to pay out money to individuals who are not producing output. Rising inflation (III) may be a consequence of unemployment, but it is not a direct cost of it. Therefore, options A and C are incorrect. Option D is incorrect because rising inflation is not a direct cost of unemployment. Therefore, the best choice is B, which identifies output foregone and unemployment compensation as costs of unemployment.

Which of the Following Is a Cost of Unemployment