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Question

38. Consider the following statements about ‘Frictional Unemployment’:
1.Frictional unemployment can be reduced by quickly matching prospective job seekers with job openings of interest.
2. It can be reduced through monetary expansion.
3. When the economy enters into a recession, frictional unemployment tends to increase.
Which of the above statement(s) is/are incorrect?


A
Only 1 and 2
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B
Only 1 and 3
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C
Only 2 and 3
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D
Only 3
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Solution

The correct option is C Only 2 and 3
1. Frictional unemployment is always present in the economy, resulting from temporary transitions made by workers and employers or from workers and employers having inconsistent or incomplete information.
2. Frictional unemployment is beneficial to the economy. It is an indicator that individuals are seeking better positions.
3. Frictional unemployment can be reduced by quickly matching prospective job seekers with job openings of interest.
4. This is accomplished through the transmission of information. Through social media and job posting websites, individuals looking for jobs may now experience a quicker turnaround to get hired.
5. This reduces the frictional unemployment level.
6. Frictional unemployment is the only form of unemployment that will not be reduced through monetary expansion.
7. In fact, if monetary expansion occurs, more job openings will occur, thus potentially resulting in an increase of frictional unemployment.
8. When the economy enters into a recession, frictional unemployment tends to decline. This is a result of workers being afraid to leave their current positions in search of new ones.

Economy

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