Question

Suppose the world price of cotton rises substantially. The demand for labor among cotton-producing firms in Texas will   . The demand for labor among textile-producing firms in South Carolina, for which cotton is an input, will   . The temporary unemployment resulting from such sectoral shifts in the economy is best described as   unemployment.

Suppose the government wants to reduce this type of unemployment. Which of the following policies would help achieve this goal? Check all that apply.

Establishing government-run employment agencies to connect unemployed workers to job vacancies

Improving a widely used job-search website so that it matches workers to job vacancies more effectively

Offering recipients of unemployment insurance benefits a cash bonus if they find a new job within a specified number of weeks

Answer 1

Suppose the world price of cotton rises substantially. The demand for labor among cotton-producing firms in Texas will decrease. The demand for labor among textile-producing firms in South Carolina, for which cotton is an input, will increase. The temporary unemployment resulting from such sectoral shifts in the economy is best described as frictional unemployment.

Suppose the government wants to reduce this type of unemployment. Which of the following policies would help achieve this goal? Check all that apply.

• Establishing government-run employment agencies to connect unemployed workers to job vacancies.
• Offering recipients of unemployment insurance benefits a cash bonus if they find a new job within a specified number of weeks.