Suppose researchers discover that a government program to match job seekers and employers has caused an increase in the unemployment rate. Does this mean that the program has failed?
What will be an ideal response?
No. A program to facilitate good job matches will increase frictional unemployment, if it inspires enough of either discouraged workers (who had given up their job search) or discontented workers (who have a job) to join the unemployed in the program. If the program improves job placements, it enhances the economic benefit of frictional unemployment, regardless its impact on the rate of unemployment.
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In a competitive market equilibrium:
A) social surplus is minimized. B) all the gains from trade are not realized. C) there is Pareto efficiency. D) all the firms earn positive economic profits.
How does a country maintain a fixed exchange rate?
A) By intervening in the foreign exchange markets and buying or selling currency as needed to achieve the desired exchange rate. B) By forbidding foreign exchange markets to trade currency at anything other than the official exchange rate. C) By setting domestic interest rates to achieve purchasing power parity as the desired exchange rate. D) By intervening in import and export markets to achieve the desired current account and exchange rate.