Government unemployment insurance tends to A. increase the unemployment rate by lowering the opportunity cost of job search. B. increase the unemployment rate by increasing the opportunity cost of job search. C. have no direct effect on the unemployment rate. D. decrease the unemployment rate by lowering the opportunity cost of job search.

Question

Fiona Black

Business

26 October, 16:51

Government unemployment insurance tends to A. increase the unemployment rate by lowering the opportunity cost of job search. B. increase the unemployment rate by increasing the opportunity cost of job search. C. have no direct effect on the unemployment rate. D. decrease the unemployment rate by lowering the opportunity cost of job search.

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Answers (1)

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Ximena Molina · Answer 1

B. increase the unemployment rate by increasing the opportunity cost of job search

Explanation:

Unemployment is inability of people able & willing to do a job, to get a job. Opportunity Cost is the cost of next best alternative foregone while choosing an alternative.

A Job has an opportunity cost in terms of sacrifised 'unemployment insurance' by government. If the unemployment insurance by government increases, it increases the opportunity cost of job search. This would tend to bring an increase in the unemployment rate.