During the early 1990s, companies started downsizing. One of the results of this downsizing was the permanent reduction in the number of middle management positions. This change in the way businesses operate would have
A) increased the natural rate of unemployment.
B) decreased the natural rate of unemployment.
C) not affected the natural rate of unemployment.
D) could have either increased or decreased the natural rate of unemployment.

Question

Quizplus · Accepted Answer

Downsizing and permanent reduction in middle management positions would have led to increased unemployment because a significant number of individuals in those positions would have lost their jobs. The natural rate of unemployment refers to the level of unemployment that exists in the economy due to normal turnover and job search activities. Therefore, a reduction in middle management positions would have caused an increase in the natural rate of unemployment.

During the Early 1990s, Companies Started Downsizing