Which of the following is true?

Question

Quizplus · Accepted Answer

High unemployment rates over lengthy time periods suggest that there are structural and regulatory factors that are preventing the labor market from reaching its natural rate of unemployment, which is the level of unemployment at which demand for labor equals its supply. Therefore, option B is true. Option A is incorrect because the United States had consistently lower unemployment rates than many major European economies during the last decade. Option C is incorrect because changes in the age composition of the labor force can affect the natural rate of unemployment. For example, an increase in the relative number of youthful workers can increase the natural rate of unemployment because they tend to have higher rates of unemployment due to inexperience or lack of skills. Option D is incorrect because institutional changes like an increase in the minimum wage can affect both cyclical and natural unemployment by altering the incentives for firms to hire workers.

Which of the Following Is True