Which of the following statements about unemployment is TRUE?
Multiple select question.
A The natural rate of unemployment is greater than zero.
B Unemployment is zero in most developing countries.
C Unemployment is equal to zero in most developed countries.
D All economies experience some unemployment regardless of economic strength.
E In well-performing economies, unemployment is zero.
The correct answer and explanation is:
The correct answers are A and D.
Explanation:
A. The natural rate of unemployment is greater than zero.
The natural rate of unemployment refers to the level of unemployment that persists even in a fully functioning economy. It includes frictional unemployment (when people are temporarily between jobs) and structural unemployment (due to mismatches between skills and job requirements). Since these forms of unemployment exist in any economy, the natural rate of unemployment is always greater than zero.
D. All economies experience some unemployment regardless of economic strength.
Even in a strong economy, some level of unemployment is inevitable. This can be due to factors like workers transitioning between jobs (frictional unemployment) or technological advancements that change the demand for certain skills (structural unemployment). Hence, unemployment is a constant feature of any economy, regardless of its strength.
Why the other statements are incorrect:
B. Unemployment is zero in most developing countries.
This statement is incorrect because unemployment tends to be higher in developing countries. These economies often face challenges such as high levels of informal labor, insufficient job creation, and education mismatches. Unemployment is typically not zero in such nations.
C. Unemployment is equal to zero in most developed countries.
Even in developed economies, unemployment is not zero. The labor market in developed countries experiences frictional and structural unemployment, even during periods of strong economic growth. This type of unemployment is a natural and necessary component of a dynamic economy.
E. In well-performing economies, unemployment is zero.
This statement is incorrect. Well-performing economies can still have some level of unemployment. While low unemployment rates are a common feature of healthy economies, zero unemployment is not feasible due to natural factors like job transitions and industry changes.
In summary, economies always have some unemployment due to natural factors, and the natural rate of unemployment is never zero.