Answer to Question 1
A
Answer to Question 2
Job search is the activity of looking for a suitable job. Unemployed workers are searching for a job, and so the longer these workers search, the greater the amount of unemployment. Three major factors affect the amount of job search: demographic change, unemployment benefits, and structural change. Demographic change refers to the fact that at times there are more young people looking for their first jobs and at other times there are fewer young people searching for a job. When more young people are searching, the unemployment rate rises and when fewer young people are searching, the unemployment rate falls. Unemployment benefits affect the amount of job search. An increase in unemployment benefits lowers the cost of remaining unemployed and so workers search for longer periods of time. As a result, the unemployment rate rises. Finally, structural change affects the amount of job search. Structural change is the result of technological change. At times, this change creates a slump during which workers from failing industries are not good matches for the jobs created in booming sectors. In this case, the amount of job search and unemployment rises. At other times, the workers released by the slowing sectors have skills that are good matches for the expanding sectors and so the amount of job search and unemployment falls.
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