Question

1. some have suggested that its 4.1% rate of unemployment, the U.S. economy is at "full employment". in no more than five(5) lines of typed text beliw this question, describe and explain what this means. bes sure to provide a numerical analysis in your answer

2. consider the facts in the question immediately above. jim, a worker in a hypothetical economy just received a 3.2% pay raise from his employer. in no more than five(5) lines of typed text below this question, describe and fully explain the impact, if any, on jim.

Answer 1

1)

• 4.1 % rate of unemployment is regarded as full employment. It is also called natural rate of unemployment.
• Natural rate of unemployment exists due to frictional and structural reasons.
• Frictional unempployment is seen due to time taken to find a new job. Lack of information renders few job seekers unemployed for limited period of time.
• Further, structural unemployment arises due to change in skill requirement. Hence, workers take time to learn new skills and get absorbed in new jobs. Hence, both form of unemployments are temporary.

2)

• 3.2 % rise in pay would increase income of jim
• Now, he would start demanding more goods and services.
• Demand of more goods and services would enhance more economic activities and more output would be produced. Thus, employment opportunities would also spring up.