Why does unemployment arise and what makes some unemployment unavoidable?
What will be an ideal response?
In a dynamic economy some unemployment is unavoidable. For instance, growth means that some workers will always be entering the labor force without a job and therefore be unemployed. Consumers changing their demand for one good over another means workers in the newly less-favored industry will lose their jobs and also be unemployed. Moreover some workers will always be leaving their current job to search for a better job and these workers, too, will be unemployed. So some unemployment is unavoidable as the economy churns and reacts to changes.
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Holding money to meet unplanned expenditures is
A) the precautionary demand for money. B) the transactions demand for money. C) the asset demand for money. D) the capital demand for money.
In the above figure, starting at E1, if there is a supply shock that is permanent, the
A) aggregate supply would shift to SRAS1 and LRAS1 would shift to LRAS0. B) aggregate supply would shift to SRAS1 and LRAS0 would shift to LRAS1. C) aggregate supply would shift to SRAS2 and LRAS0 would shift to LRAS1. D) aggregate supply would shift to SRAS1 and then return to SRAS0.