What would be the most likely effect of an increase in the world price of oil, which would create a sectoral shift?
A) There would be a decrease in unemployment, and the decrease would be greater in a country with unemployment insurance than in one without.
B) There would be a decrease in unemployment, but the decrease would be smaller in a country with unemployment insurance than in one without.
C) There would be an increase in unemployment, and the increase would be greater in a country with unemployment insurance than in one without.
D) There would be an increase in unemployment, but the increase would be smaller in a country with unemployment insurance than in one without.

Question

Quizplus · Accepted Answer

When there is a sectoral shift, such as an increase in the world price of oil, it tends to have a negative impact on some industries and a positive impact on others. In this case, industries such as transportation and manufacturing that rely heavily on oil would be negatively affected. This could lead to a decrease in employment in those industries, therefore increasing overall unemployment. Countries with unemployment insurance could potentially see a greater increase in unemployment because workers may be less likely to take alternative, lower-paying jobs that become available as a result of the sectoral shift, since they have unemployment benefits to rely on.

What Would Be the Most Likely Effect of an Increase