In the DMP model,an increase in the unemployment insurance benefit does not,under any circumstances
A) increase the vacancy rate.
B) increase the unemployment rate.
C) reduce labor market tightness.
D) reduce the size of the labor force.

Question

Quizplus · Accepted Answer

According to the DMP model, an increase in unemployment insurance benefits would increase the reservation wage of workers, making them less likely to accept low wage job offers. This would reduce the number of job vacancies, and hence decrease the vacancy rate. However, it would not necessarily affect the unemployment rate, as the labor force would also likely decrease as workers become more selective in their job search. Therefore, options B, C, and D cannot be valid choices.

In the DMP Model,an Increase in the Unemployment Insurance Benefit