Question

14. Structural unemployment exists in a well-functioning economy because it takes time to match workers with jobs.

Select one:

True

False

15. An increase in the tax on capital causes Investment to fall and r to fall in equilibrium.

Select one:

True

False

Answer 1

The structural unemployment exists when there is a shifts in the economy which creates a mismatch between the skills workers have and the skills needed by employers. The shift of the company are also the example of structural unemployment.

It means Structural unemployment exists in a well-functioning economy because it takes time to match workers with jobs.

Hence the given statement is true.

15.

When there is an increase in the tax on capital, then the cost of purchasing capital increases, so the cost of production increases, so investment by the firm decreases, that leads to decrease in the demand for the loanable fund by the firms, so the demand curve of the loanable fund shifts leftward. Hence interest rate decrease.

Hence it can be said that an increase in the tax on capital causes Investment to fall and r to fall in equilibrium.

Hence the given statement is true.