📚 Learning Guide
Unemployment Rates and Economic Indicators
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If a country's unemployment rate is significantly above its natural rate, what is likely the underlying economic cause?

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Choose the Best Answer

A

The economy is experiencing a recession, leading to increased cyclical unemployment.

B

There are more job openings than workers available, causing frictional unemployment.

C

The workforce is not adapting to new technologies, resulting in structural unemployment.

D

Seasonal jobs are being eliminated, which increases the overall unemployment rate.

Understanding the Answer

Let's break down why this is correct

Answer

When a country's unemployment rate is much higher than its natural rate, it often means there is a problem in the economy, such as a recession. A recession is when the economy slows down, leading to less demand for goods and services. This can cause businesses to cut back on hiring or even lay off workers, which increases unemployment. For example, during the 2008 financial crisis, many companies struggled, resulting in millions of people losing their jobs. Overall, high unemployment above the natural rate indicates that the economy is not functioning well and needs support to recover.

Detailed Explanation

When the economy is in a recession, many businesses struggle. Other options are incorrect because This answer suggests there are too many jobs and not enough workers; This option talks about workers not keeping up with new technology.

Key Concepts

Cyclical Unemployment
Natural Rate of Unemployment
Economic Recession
Topic

Unemployment Rates and Economic Indicators

Difficulty

medium level question

Cognitive Level

understand

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