When the automobile replaced horse-drawn carriages as the principal means of transportation, firms producing horse-drawn carriages went bankrupt and permanently laid off all their workers, thereby increasing
A) frictional unemployment.
B) structural unemployment.
C) frictional and cyclical unemployment.
D) cyclical unemployment.

Question

Quizplus · Accepted Answer

Structural unemployment occurs when there is a long-term decline in demand for a particular type of labor, such as when an industry becomes obsolete due to technological advancements or shifts in consumer preferences. In this case, the shift from horse-drawn carriages to automobiles represents a technological advancement that permanently reduced the demand for carriage makers, leading to structural unemployment.

When the Automobile Replaced Horse-Drawn Carriages as the Principal Means