Unemployment can exist in a market clearing model, if:
A)there are frictions in the labour market.
B)it takes some search time for workers to find jobs.
C)we allow for differences among workers and jobs.
D)all of the above.

Question

Quizplus · Accepted Answer

Unemployment can exist in a market clearing model if there are frictions in the labor market, such as information asymmetry or institutional barriers; if it takes some search time for workers to find jobs due to geographical, informational or other reasons; and if there are differences among workers and jobs that prevent a perfect matching. Therefore, all of the above factors can contribute to the persistence of unemployment even if there is no shortage of demand or supply in the market.

Unemployment Can Exist in a Market Clearing Model, If