Question

The fictional country of Yieng has had an influx of updated technology to its manufacturing plants and the medical field in the last three years. This has boosted the growth of the country’s productivity by 75%, but this year the pace has significantly dropped off. Wages were at first slow to respond to the growth, but now have reached new heights. Now that productivity growth has stopped increasing, what do you expect to happen to the natural unemployment rate for this stimulated growth period?

• Natural rate of unemployment will decrease as the new technology displaces workers in the aforementioned industries.

• Natural rate of unemployment will remain unchanged because frictional and structural unemployment are not affected by productivity growth.

• Natural rate of unemployment will increase because productivity has decreased, wages are high, and there is a gap between demand and labor supplied.

Answer 1

Summary of Answer :-

1) Explain main body.

2) Frictional unemployment.

3) Structural unemployment.