Explain how the existence of unemployment compensation may ...

[beccaep]

Explain how the existence of unemployment compensation may actually result in a higher unemployment rate than would otherwise occur if there where no such compensation in the first place.
 
  What will be an ideal response?

Question 2

Under what circumstances would the GDP deflator be less than 100 after the base year?
 
  A) The GDP deflator will be less than 100 if there has been deflation relative to the base year.
  B) There are no circumstances under which the GDP deflator could be less than 100.
  C) The GDP deflator will be less than 100 if there has been inflation relative to the base year.
  D) The GDP deflator will be less than 100 if there has been inflation of less than 2 per year relative to the base year.

[janeli1]

Answer to Question 1

The existence of unemployment compensation reduces the opportunity cost of looking for work. Job searchers may take longer looking for work under such a system. However, without any unemployment compensation job seekers may choose to accept job offers more quickly in order to pay the bills since they are not receiving compensation while they are searching for work. In a nutshell the opportunity cost of searching is very high and they may prefer to end their job search much more quickly.

Answer to Question 2

A

[beccaep]

Correct answers!

[janeli1]

Great! Please up vote