If unemployment benefits, payable for 26 weeks, became more generous it would be likely to _____ structural unemployment and _____ the natural rate of unemployment:
A)Not change; not change
B)Not change; increase
C)Increase; increase
D)Increase; not change

Question

If unemployment benefits, payable for 26 weeks, became more generous it would be likely to _____ structural unemployment and _____ the natural rate of unemployment:
A)​Not change; not change
B)​Not change; increase
C)​Increase; increase
D)​Increase; not change

Quizplus · Accepted Answer

If unemployment benefits became more generous, it would reduce the incentive to find work and increase the duration of job search. As a result, it would likely increase structural unemployment, which is caused by a mismatch between the skills and qualifications of job seekers and the available job openings. This, in turn, would increase the natural rate of unemployment, which is the rate that is consistent with a stable inflation rate and other macroeconomic conditions. Therefore, option B is the correct choice because it reflects this likely outcome.

If Unemployment Benefits, Payable for 26 Weeks, Became More Generous