Question

Suppose the world price of steel falls substantially. The demand for labor among steel-producing firms in Pennsylvania will (increase, decrease) . The demand for labor among automobile-producing firms in Michigan, for which steel is an input, will (increase, decrease_ . The temporary unemployment resulting from such sectoral shifts in the economy is best described as (cyclical, frictional, structural, seasonal) 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.

Increasing the benefits offered to unemployed workers through the government's unemployment insurance program

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

Answer 1

The demand for steel falls substantially it will reduce the price of the steel and with the price, the wages will come down. At a lower price and output, the demand for the labor will "Decrease".

With lower demand for steel, the price of steel will fall. The demand for labor among automobile industry will "Increase".

At a lower input cost, the supply of Automobile will increase and so will the demand to produce more the automobile firms will hire more labor.

The sectoral shift is described as "Frictional unemployment"

IF the government want to reduce this type of unemployment. They need to:

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