Unemployment can exist in a market clearing model, if:
A)there are frictions in the labour market.
B)the labour supply curve is upward sloping.
C)the labour market is in equilibrium.
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, search costs, or minimum wage laws. The labor supply curve being upward sloping or the labor market being in equilibrium do not necessarily imply the absence of unemployment.

Unemployment Can Exist in a Market Clearing Model, If