Chapter 3R, Problem 2FRQ

a)

To determine

The question requires us to determine the type of unemployment affected by the new investments.

Answer to Problem 2FRQ

Answer: Frictional unemployment

Explanation of Solution

An investment in an online application reduces the time person spends on job search and causes the people to get job easily and in less period of time. As the result of this investment, the frictional unemployment in the market will change.

Economics Concept Introduction

An individual is considered unemployed who is not working, but actively looking for a job.

b)

To determine

The question requires us to determine the impact on unemployment.

Answer to Problem 2FRQ

Answer: Decrease.

Explanation of Solution

Frictional unemployment reflects the unemployment that occurs during the time workers spend in a job search. A certain amount of such unemployment is expected always in an economy because job creation and job destruction are constant processes.

The investment in the new application will reduce frictional unemployment in the market.

Economics Concept Introduction

An individual is considered unemployed who is not working, but actively looking for a job.

c)

To determine

The question requires us to determine the impact on the natural rate of unemployment.

Answer to Problem 2FRQ

The natural rate of unemployment will fall.

Explanation of Solution

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

Natural rate of unemployment = structural unemployment + frictional unemployment.

So, a fall in frictional unemployment will cause the natural rate of unemployment to fall as well because there is a direct relationship between the natural rate of unemployment and frictional unemployment.

Economics Concept Introduction

An individual is considered unemployed who is not working, but actively looking for a job.

d)

To determine

The question requires us to determine the impact on real GDP.

Answer to Problem 2FRQ

The value of real GDP will increase.

Explanation of Solution

When people get jobs, their income level will increase. A higher income indicates higher demand for goods and services and causes the production and thus real GDP in the economy to increase.

Therefore, an increase in investments in the online application will result in a higher GDP in the economy.

Economics Concept Introduction

The gross domestic product (GDP) is the measurement of the final goods and services produced in an economy in a financial year. GDP is the indication of economic growth. It doesn’t say much about the quality of growth.