An increase in unemployment insurance and other transfer payments may A. reduce the rate of inflation...

An increase in unemployment insurance and other transfer payments may

A.

reduce the rate of inflation at every level of unemployment.

B.

increase the natural rate of unemployment.

C.

increase the number of discouraged workers.

D.

lead to less unanticipated inflation.

Expert Solution

An increase in unemployment insurance and other transfer payments may increase the number of structurally and frictionally unemployed workers. Therefore, it will increase the natural rate of unemployment, which is the combination of structural and frictional unemployment.

Answer: option B

Rahul Sunny answered 2 years ago

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