Chapter 3R, Problem 24MCQ

To determine

The question requires us to determine the factor which causes the natural rate of unemployment to increase.

Explanation of Solution

When the government increases the period for getting unemployment benefits, the unemployed people will have less incentive to search the jobs and they will prefer to stay without a job. This in turn increases unemployment in the market.

Thus, the government policy to increase the time for getting unemployment benefits will cause the natural rate of unemployment to increase.

Option “b” is correct.

Economics Concept Introduction

The unemployment rate that occurs from the effects of structural unemployment and frictional unemployment is considered the natural rate of unemployment.

The natural rate of unemployment = structural unemployment + frictional unemployment.