Question

Which policy: monetary or fiscal – is responsible for the short-term problem-solving?

State at least two reasons why would a worker move into unemployment pool?

Why would better unemployment benefits increase the unemployment rate?

Answer 1

1. Monetary Policy- Even if applied rapidly, the monetary policy's macro-effects generally occur after a while. It may take months or even years to materialize the effects on an economy. Most economists believe that money is "just a mask," and while in the short run it helps to stimulate an economy, it has no long-term effects except to increase the general price rate without improving real economic production.

2. Another cause of unemployment is to leave the workforce on a voluntary basis. Some of the unemployed have saved enough money to leave disappointing jobs. They have to look for the privilege before they find the right opportunity. The second cause is the transfer of jobs. They're unemployed until they're in the new city.

The third cause is the influx of new workers into the labor force. It involves students who are graduating from high school, university and higher education. We are looking for a job that suits in with their new skills and knowledge. This is a primary cause of unemployment among young people. The fourth factor is when job seekers return to work. These are people who went through a time where they stopped looking for work in their lives. They might have stopped working to raise children, marry, or care for the elderly. Such four triggers are an inevitable part of the process of job search. The good news is that, in general, frictional unemployment is voluntary and short-term.

3. All developed economies provide plans of unemployment benefits to protect workers from major losses of income during unemployment periods. The services protect workers from having to sell their property or accept jobs below their qualifications by allowing unemployed workers to meet basic consumer needs. In recessions, the services also help stabilize the economy. But, if benefits are too good, the services could increase unemployment and increase the rate of unemployment. Protecting workers and mitigating undesirable side effects is the political challenge.