Regarding the categories of unemployment, which statement best describes how the effect of sectoral changes compares to the effect of firms paying higher-than-equilibrium wages?
A) Sectoral changes create frictional unemployment, while firms paying wages above equilibrium create structural unemployment.
B) Sectoral changes create structural unemployment, while firms paying wages above equilibrium create frictional unemployment.
C) Sectoral changes and firms paying wages above equilibrium both create structural unemployment.
D) Sectoral changes and firms paying wages above equilibrium both create frictional unemployment.

Question

Quizplus · Accepted Answer

Sectoral changes lead to frictional unemployment as workers transition between sectors, while firms paying higher-than-equilibrium wages can lead to structural unemployment due to wage rigidity and mismatches in the labor market.

Regarding the Categories of Unemployment, Which Statement Best Describes How